Morning, everyone, and welcome to BRP's 2015 Analyst Day. My name is Pascal Bossé , and I will be your host this morning. First, I would like to draw your attention to some of the forward-looking statements that will be made today. I want to stress the fact that you might want to take a look at the slide. Those forward-looking statements are based on a number of risks and uncertainties, and please make sure to pay attention to those and to read them carefully. This presentation is being audio recorded. On that note, I want to wish to extend a warm welcome to those listening to the presentation via the web. Turning to the formal agenda for today. José Boisjoli, President and CEO, will kick things off with the 20 fiscal 2015 review and strategic priorities update. Following José will be a presentation by Anne Bélec.
Anne will come and discuss the brand strategy and the next wave of growth. Following Anne will be Chris Dawson. Chris will be here to come and talk about the global sales and consumer experience organization that he oversees and will provide a market update. We will take a short break, 10 minutes, more or less. Coffee and refreshments will be served outside of the room and we will reconvene at 9:35 A.M. with Alain Villemure, who will present the marine propulsion systems business. Alain will be followed by Sébastien Martel for a financial review, and José will come back to introduce the 2020 manufacturing strategy. Last but not least, Thomas Uhr, the General Manager for BRP-Rotax here in Austria, who will come and present Gunskirchen 2020 and review the Rotax operations. Really Gunskirchen 2020 as a case study to José's presentation on the Vision 2020. Maybe just one detail.
We just ask for everyone to please turn off your cell phones, if possible, to avoid issues with the retransmission. We will have a Q&A session after each speaker, and a microphone will be circulating so that those on the web can hear the questions. Now our first speaker for this morning. At the helm of BRP since 2003, José needs no introduction. Known as the man behind a lot of the innovative breakthroughs at BRP, he is resolutely focused on bringing to consumers the ultimate power sports experience. José is, by a mile, the most passionate about the business and the products, and some say that even when asleep at night, he is riding one of our products. With no further ado, I will turn it over to José.
Thank you, Pascal. I swear I was not riding last night. A few things. First, welcome to Austria. I know coming from North America, it's a commitment to come here, but we acquired Rotax in 1970, and I'm sure you will be able, during the day, to feel the long heritage, the know-how, the craftsmanship that we have here on this site. And we really believe internally that Rotax is a competitive advantage for us, and I hope by the end of the day that you will be able to feel the same. This morning, I would like to do a review of fiscal year 2015 and our strategic priority going forward. If you look at the fiscal year 2015, many successes, a lot of new product launch in the last two years, but particularly last year, the Sea-Doo SPARK success.
I think we are on something to respark the industry. The transfer of the watercraft line from Canada to Querétaro, that is on plan, and the North America dealer expansion. The challenges that we had, year-round product, the growth was a bit more difficult than what we had planned. The long spring affected our retail in April and May. The competitive dynamic in off-road vehicle, I will come back on this in a few minutes. Russia, obviously. All of this ended up in H1, H2, 2018, which for some investors was a bit scary and skeptical. We had those years before. We've been able to manage it. The end result, we're pretty happy with our performance overall for all financial criteria. You see the gross profit going down by 130 basis points.
I would like to remind you that about 100 points is because of a fix, our top line growing faster than the bottom line. The other 30 basis points is mainly production transition cost that we have through the year and also the entry in more entry level product like the SPARK or the Mid-CC ATV. Overall, happy with our financial performance in fiscal year 2015. Now, here are our scorecards since IPO. At IPO time, we came out with our story with five strategic priorities. The five priorities, I will come back, I will give you our scorecard on each of them. The first priority was focus on innovation. I will come back on this. Grow revenue from year-round product, the North America dealer network expansion, grow international sales, drive margin increase.
If I go one by one. First, product innovation. We believe that in the last two years, we have come out with three products that will change the game, and the first one is the Sea-Doo SPARK. We believe we can re-energize the watercraft market. The E-TEC G2, again, Alain will give you more detail today, but we are flattish in market share for the last 10 years. We believe that the G2, by creating the demand from the customer, it will force more builders and dealers to do business with us. The third one is the Spyder F3. Happy with our progress so far, but we need to accelerate the growth, and we believe the Spyder and F3 is really key to continue that momentum on the on-road product. Many innovation awards, an NMMA for SPARK and E-TEC G2, and the Red Dot Design.
Our design team likes to participate in the Red Dot Design that's European. Mainly, we're competing against German car companies, the BMW, the Audi, the Volkswagen of this world, and we're very happy this year we have four awards for the F3, the E-TEC G2, the Sea-Doo SAR (Search and Rescue), and the Can-Am Outlander L. Very happy about that. Also, some highlights on other product innovation, the turbocharger as side-by-side, the new Rotax 600 and 1300 cc ACE family engine that have different modes for driving, very good in fuel efficiency. The SUMMIT XP 3 and the Outlander L ATV family. Like you can see, in the last two years, we didn't rest. We came out with a lot of new product, and I can assure you, going forward in the next two years, you will see a lot of new product introduction.
The scorecard on year-round product. We grew our sales by 12% CAGR in the last two years. A bit more difficult last year than what we had anticipated, and 23% for the last four years. It's pretty good growth in the year-round product. The ATV industry is about flattish. Our entry in the mid-cc will give us some ammunition to continue to grow in the ATV business. We were surprised by the dynamic in the industry. The sport category is growing but very competitive. We believe with the Maverick X ds, we're well positioned for the future. The Rec, the Commander category, the growth has slowed down. It's a bit mid-single digit. We're very strong in that product category.
The utility, the bench seat type category, which is today 60% of the industry, we're not there yet. All of this made our growth a bit more difficult than what we had planned for the side-by-side business. On the Spyder side, happy with the progress. Last year with the celebrity campaign, we've gained 17 point in awareness in the U.S., 10 in Canada. Happy with the engagement of some dealer. Others, we need to push them more. That's something that we are working on, and Chris will give you a bit more color about our plan with Spyder in a few minutes. That's our scorecard for year-round product. Happy overall. The expansion of the North American dealer network, again, on plan. We've signed 114 new dealer in the last two years. A plan of signing 75 to 85 new this year in fiscal year 2016.
We improved the coverage of side-by-side and Spyder by 17% since 2013. I'm happy because in the last few years, we developed a very robust approach to sign new dealers. Things is going quite well. If there is one disappointment, it's the time that it takes for a dealer to ramp up. Chris will give you a bit more detail, but we had planned at the beginning maybe six to nine months. It takes more 12 months before they are up and running. We're following the plan. We believe we have a very good plan. At the end of the expansion, we'll have an optimized dealer network in North America. We feel we've done a good progress in the last two years, and it will continue. Grow international sales. We grew 6% over the last two year, 8% excluding Russia. Happy.
We believe that with product like the SPARK, the mid-cc ATV, and the Evinrude G2, we're well positioned to continue our growth at international. China, midterm, long-term, good potential. Above all this, disappointed with the situation in Latin America and Russia. That being said, we're very well positioned in those area when they will recover. Very difficult to predict the international sales because there is always country that are doing better than planned, some more difficult, but overall, we're very well positioned worldwide with our dealer network. Margin increase. As you saw last year, we've lost 100 basis point because of the FX, but we're following our plan. I will come back later on this morning to explain our manufacturing strategy, but basically, we're continuing to expand on manufacturing in Mexico, a lower cost country. The watercraft transfer will be end.
We are handling for production in Valcourt in a month, and that will be the last time. After that, all production of watercraft will be focused in Mexico. After all those investments, we will leverage the investment made in our manufacturing footprint in the last few years. I will talk this morning in my second part, and Thomas will also talk about it, the realignment that we're doing in Gunskirchen here and in Valcourt, because those sites have lost production. We are right now in the process of realigning those two sites to continue the value added and improve margin going forward. Now, very important, two year after the IPO, we are focusing the team on three strategic priority, and this is a message that we will work with you a lot more.
At IPO time, we had five priority: product innovation, grow year-round product, expand dealer network in North America, grow international sales, and drive margin. Now, going forward, we'll talk about three: growth, agility, and lean enterprise. Here how it comes together. We're not changing the plan. It's an evolution of the plan. Growth is gaining market share through all product innovation into all our product line, grow our year-round product, continue the dealer network development, and define the next wave of growth. Anne will talk about it later on this morning, but we believe within the six product line that we have, we can continue to grow in the next three to four years. Beyond that, we are right now working on the next wave of growth. The first pillar will be talking about growth, subdivide into different strategy. The second one is agility.
Leverage modular approach for engine and vehicle. More and more, we'll use engine in more than one product line. We'll use vehicle with a lot of modularity, and we also working on more flexible supply chain so that any product can be assembled at any factory for agility. The last, and at least, is lean enterprise. We're getting better to DTQC, design to quality and cost. We drive margin improvement. Every new platform that goes into development, we're planning a margin improvement. I will talk again about our manufacturing strategy, and we call that the 2020 plan manufacturing strategy to optimize our facility. We invest a lot in the last few years. We need to optimize the facility to drive margin. All those strategic priorities will end up to deliver stronger financial result, growth, improve margin, and improve cash flow.
With all of this together, our goal for 2020, which is our fiscal year 2021, is to grow our sales by 10% a year to reach about CAD 6 billion in fiscal year 2021. This is at Canadian, U.S. dollar at 125-ish, roughly. It will depend how it goes, but at 125-ish, we believe we can reach CAD 6 billion by fiscal year 2021. The normalized dilute EPS should grow by 15%. Again, we believe we can grow our EPS faster than the revenue because we will leverage the investment that have been done into our manufacturing facility in the last few years. That's in a nutshell where we are. If there is a few thing that I would like you to remember from that first section, after two year as a public company, we are adjusting the plan. We're not throwing out the plan.
We are adjusting the plan. The focus for growth, new product, entering new segment, improving the dealer network and geographic diversification has not changed much. We're putting more emphasis in manufacturing strategy, we'll explain to you this morning a bit more about the manufacturing strategy that will bring margin improvement in time because a lot of investment have been done. Overall, we're happy with our progress after two years being a public company, we're very motivated to continue the growth. That's in a nutshell my introduction for this morning's session. Any question, any comments at this point? Yep.
Good morning, José. Just maybe a quick question on your EPS projection for, or your goal in FY 2021. Is that organic? Does that include any acquisitions or share repurchase?
It's organic.
Okay, all organic.
No share purchase included in there.
Okay. Thank you.
Just looking at some of the growth in the dealer network and the growth in the year-round product lines, does that have a material impact over that five years on the seasonal patterns of the business?
Not sure.
Like changing the front-end, back-end waiting.
Yeah, for sure. If you look to our history, I give you the example. We started the side-by-side business. We introduced the Commander in December 2010 and started deliveries in 2011, which is our fiscal year 2012. When we enter a new segment, like that year, H1, H2 was a lot more balanced. No doubt, and I had a discussion last night with some of you No doubt that the year-round product business is probably the best, the most stable of all our product lines. If you look at the demand versus Retail versus wholesale, the gap is small. On top of it's quite stable through the season. There is a peak in the fall, a small peak in the spring, but you can sell product every month. Being stronger in the off-road business will better balance our H1, H2.
That being said, for us, seasonal products, snowmobile and watercraft are very good product line. It's a big portion of our sales, those will always remain seasonal. We understand that for some investors, this is something that they don't like, we've been managing this business for 12 years now, privately. We had those cycle where we are unbalanced, that's somewhat the nature of BRP. I think it will improve, there will still be some fluctuation because of our strength in seasonal product. Yep.
José, in your forecast, how much of the growth is going to come from introduction of new products? What kind of margin expansion should we be looking at?
All the margin expansion, our CapEx are included in our numbers. All of this is in there. Again, that's the long-term goal. We believe it's achievable. We will give you yearly guidance after that. For sure, the big growth will come from entering a new segment. That's where, because on snowmobile, we are number one in every single segment that we are in. We are number one in watercraft. Sea-Doo SPARK could play in some country, the big growth will come of entering a new segment, being more aggressive in new segment, new product line. Like the mid-CC ATV. Obviously, today, we are playing only in 40% of the side-by-side market. Spyder, six years after being in the business, we know why some customers buy, why some don't buy.
We are betting a lot on the Spyder F3, the two models that you have today are the first models from a family of new products on the Spyder business. The growth will come mainly from there. Even though the E-TEC, I think with the E-TEC G2, we are on something, Alain Villemure will talk about it, to really grow that business. It's a lower scale overall.
José Boisjoli, just to come back on the previous question. You currently have six product lines, you say that in the next three years, you will be looking to potentially add another product line. Do you assume in your forecast that there will be other product lines that will be added by 2020?
Right now, in the planning that we have shown you this morning, it is within the six product lines that we have.
Product line. Okay. What does it imply, in terms of either gross margin or EBITDA margin? Assuming a 15% take, or what kind of margin?
If you look at the top level, the line growth and the profitability growth, 15%, it's a 1.5x versus top line. There is some margin improvement required in order to deliver that and also operational leverage from the OpEx. We can look at the model, but basically a lot, again, the operating leverage, the gross margin leverage is an important driver to get the 1.5x versus the top line.
Okay, perfect. Any assumptions in terms of economic cycle by 2020, or is it something?
No, it's a constant economy as we have it today.
Yeah.
We're not expecting either a boom or a recession. It's within the current conditions today and within the current conditions of foreign exchange rates as well.
Yeah. Okay, thanks.
Yep.
Thank you. I guess to continue on the top-line question. Looking at this year, about 500 basis points of top-line growth is coming from FX. FX adjusted, you're really growing flat to up 4%. I guess the question is whether that 10% is FX adjusted. If not, if it's constant currency, next year we're looking at a considerable acceleration. Do you believe that most of the source of growth will come from side by side, year-round products?
We've said openly that we're building the Juárez 2 to enter a new off-road segment, and that's where the growth will come in fiscal year 2017.
Basically 100 basis points of FX. The 0-4 is adjusted for currencies.
Sorry, just on the Juárez 2 , what is the ramp-up period, and how do you expect that to translate into revenue growth, fiscal 2017, fiscal 2018? That sort of thing.
First, I will present in my second presentation a bit more color about Juárez 2 , but the benefit of Juárez 2 is about 60-minute drive from Juárez 1 , then there will be a lot of synergies between the two factory. I will tell you more later on about Juárez 1 and Juárez 2 . The ramp up will be very quickly because we will be able to transfer some employee from Juarez 1 to Juárez 2 to make it safer. You will see right now, this afternoon, you will see in the factory here, Thomas is debugging a new type of AGV that will be transferred in the summer to Juarez 2. We believe it will be a smooth ramp up with low risk. Production is planned to start in the last quarter, accelerating in the first half of fiscal year 2017.
Thank you, José. Our second speaker today is the most recent addition to our senior executive lineup. Anne Bélec joined BRP in June of 2014 to serve as a Senior Vice President for Global Brand Strategy and Information Systems. Anne Bélec brings a wealth of experience, most notably from the automotive industry, where she brings a vision and a fresh perspective with some of the best practices that I guess could be emulated in our business. The fact that she is from the same little community of northern Quebec that I am from is no stranger to my profound admiration of her career path. With no further ado, turn it over to Anne.
Thank you, Pascal. Good morning. Given that I am sort of the newcomer to BRP, I thought I might take just a couple of minutes and talk about a little bit of my background. I came to BRP via a long stint in automotive. In fact, I spent over 27 years in the automotive industry, about half of it in senior leadership roles at Ford, at Volvo, Navistar, and a few sort of in between. I've had the opportunity to really have global scope of responsibilities in these roles, particularly in the area of product marketing, sales operations, brand strategy. Along the way, I've also had the great opportunity to work on some very transformational mandates including Ford 2000, which was about revamping the whole process around how do you incorporate the voice of the customer much further upstream in product development.
That was very interesting. A lot of these lessons I've carried with me in other roles. At Lincoln, there was a big dealer network and retail experience transformation that took place. Same thing, these lessons, the bad and the good you take along with you and something that I can bring to BRP. At Ford, I also did very in-depth work on developing the definition of the Ford global brand when Alan Mulally took the helm. Also worked on order to delivery systems to create more agility and flexibility in the order process at Ford. Also, I had the opportunity to serve on some public boards including Brunswick Corporation and in Quebec, the Industrial Alliance Group, and also a nonprofit organization called CALSTART for clean transportation.
All of these, I think, have added certainly another dimension and perspective to leadership and it's something that I hope will be a great background to bring to the party. Coming from the automotive background, comparisons to powersports are, of course, inevitable. In fact, I had the question three times last night. I thought I might as well put a slide and talk about it this morning. Of course, there's a lot of similarities. There's a very similar business model. Powersports brings a lot of uniqueness as well. On the differences side between the two businesses, powersports has a higher brand or competitive concentration. We know the cluster, we know the competitors in some segments more so than others. The size of the category requires agility throughout the supply chain. You have to be on your toes.
You have to be much more rapid. Of course, the product and innovation cycles are relatively shorter than the automotive business. That puts certainly a pressure to always come up with the next product move and innovation that counts, because the competitors are doing the same. Finally, for me as a marketer, what attracted me to the powersport business is that it is such a lifestyle, emotional purchase that's not commoditized, that makes it not only just fun to do marketing, but it's an experience that really goes beyond just a transaction of the product. It lives on for quite some time, and that I think presents many opportunities to strengthen the relationship but also to monetize it. Opportunities. When I look at the powersport business in comparison to automotive, I think that there's some opportunities that are industry-wide.
For one, there's definitely an opportunity to raise the game when it comes to the consumer experience at retail and the dealership engagement across the board. Two, because powersports is such an involved purchase, parts, accessories, clothing are the means to really enhancing the outdoor lifestyle and personalized to specific needs of the consumers. Three, I think that this industry has plenty of opportunity for more sophisticated go-to-market approaches using technology to enhance the interaction with the consumer, to improve the convenience and the service for the consumers, but also to gain efficiencies and to allow for more personalization. I think that those are certainly examples of things that are currently in place, not only in the automotive business, but in other segments that we could just apply in the powersports environment.
On the threat side, besides the obvious competitive environment that we live in, the category faces a series of threats, among which there's a high dependence on disposable income. It's a discretionary spend, so when there's economic cycles, economic downturns, we're very much exposed. There's strict regulations in terms of safety and environment, limited access to the playgrounds where we play, whether it's on water or trails or off trails. We're seeing also 2 tiers of markets developing with low-cost manufacturers, so mainly Asian manufacturers, and that's going to put increased pressure for the entire industry. Okay. What am I doing at BRP? Well, my role is actually a little bit more strategic and longer term in outlook. There's 2 key elements of the mandate that I'd like to highlight.
Of course, I'm doing a lot of other things besides these two things, but I would like to talk about these two elements of the mandate in particular. The first is the brand. By the brand, I mean BRP. Starting with how we can crystallize the BRP brand definition to fully leverage our rich heritage. We want to make it sharper, clearer throughout the organization and also externally. That's going to allow us to really prioritize, really focus on the values and the elements that make us different from everybody else in the industry. Equally important, we have an opportunity to define a brand architecture model.
That means that we want to really define and make clearer how the BRP trust mark relates to the brands in our portfolio, our product brands, and vice versa, so that we can be more efficient, more coherent in our communication. It's the BRP trust mark that becomes the red thread that runs across all the brands, still allowing for and protecting each brand's unique proposition. The brand input is a key ingredient along with the voice of the customer in the global product management and planning group, which also reports into my area of responsibility. They, in concert with design and engineering, define the next generation of products. Their role is to prioritize the customer wants, the needs, the customer research. They forecast volumes and set the pricing strategy globally to deliver on the brand promise. All these elements now converge.
The second element of my mandate is to identify what potential growth territories exist for BRP for the mid to long term, I emphasize mid to long term. José's talked about the growth opportunities that we have in the next three to four years. We're thinking we have to start now planning for what that next wave of growth is going to be. While I think BRP is enjoying good organic growth for the last decade or so, we need to think about where will that next wave of growth come from to address our aspiration. This is not a one-time effort. It's really a continuous endeavor whereby we seek to understand macro trends, societal shifts and look for that intersection with BRP capabilities. It's that intersection that will present potential new growth territories for the future.
From there, we develop a framework for how we're going to evaluate the strategic fit and prioritize these opportunities, then go execute. It's important to note that in the shorter term, there's significant growth opportunity in the current playgrounds that BRP is present. We're well-positioned in the snowmobile and personal watercraft categories. We've got wide coverage across all segments, and we're in leadership positions, snowmobile, personal watercraft. Our year-round products, however, is where the greatest opportunity lie. This chart really visually highlights how that manifests itself. In the ATV category, we just recently entered the growing mid-CC segment, and the Outlander L family of products will address this segment now and in the years to come.
As you can see in the SSV category, BRP has performed very well in the sport and the rec-ute, but it does not currently have presence in the utility segment, which now represents nearly 60% of all SSV sold. With on-road, a similar situation presents near-term opportunities for BRP. Spyder just recently launched its F3 model to compete in the cruiser segment, which represents more than 60% of the category. That's going to give us a nice play. In the marine propulsion system, the four-stroke segment just dominates. We play mainly in the small part of the market, which is our two-stroke. BRP's organic growth comes from year-round products primarily. As José mentioned earlier, by fiscal year 2021, our organic growth will be fueled by year-round products and will bring us to around CAD 6 billion in revenue.
By then, year-round products will make up a larger proportion of our total sales, resulting in a more balanced portfolio, it will help smooth our quarterly revenues during the year. As we talked about our challenge of first half, second half, this is going to help us exacerbate. We put together a little brand diagnostic chart here that further exemplifies where the growth opportunities reside. As you can see illustrated here, when we look at each of our product brands operating in different segments, they are at various stages of maturity in their respective markets. Ski-Doo and Sea-Doo are in leadership market positions in a very concentrated market structure. They offer maybe less growth potential, their awareness is very high. That's not likely where most of our growth is going to come from.
The Can-Am brands, however, are in a more fragmented market with relatively low awareness, but good growth potential. The BRP trust market is, again, that red thread that unifies our portfolio of brands across the entire portfolio and leverages the heritage and the credibility of our well-established brands. Bottom line, there's room to grow in the short-term market, the shorter term, and across a number of segments. Finally, while our organic growth is exciting and we're poised to realize its potential, we're also accelerating our efforts to define, prioritize, and plan the next wave of growth for BRP. As we've shown earlier, our core business will continue to fuel our growth in the next few years, but over the mid to longer term, we will take a look beyond and look at adjacencies, new markets that will be developed through innovation, potential partnerships, and/or mergers and acquisitions.
This effort is a continuous process to look ahead, to anticipate disruptive shifts to our business, and trends that offer opportunities when we align them with BRP capabilities. In conclusion, I see a lot of under-leveraged equity from our brand heritage that we can build on to capture our Can-Am growth and our other brand growth potential. I think that we can apply lessons from the automotive industry and other industries to better connect, engage, and create value for our consumers. This concludes my segment, and I'd be happy to take some of your questions. Yes, Benoit.
Just a question in terms of some of the customer surveys you've done in terms of what's the perception, especially in the year-round products, what's the perception around reliability, quality? In terms of the new people you're converting to that market, are they coming from Polaris, Arctic Cat? How are you converting them? What's the driving factor there?
Well, each model is a little bit different. If I may break down your question. What I heard was, what are the perceptions around reliability? I think in the brand diagnostic slide, we had net promoter scores, and you actually see quite a difference between our ATV brands and our SSV brands. The experience has been slightly different. But clearly, something that's an important consideration for our consumers.
Just to come back on the previous slide, the white space in the current playground, just want to make sure that the F3 is defined among the cruiser naked category.
Yes.
Right? Okay, perfect.
That's correct. Yes.
Just on the bar just below for Marine Propulsion Systems, obviously you're not in the four-stroke, so is the strategy more to enlarge the two-stroke category, so better teach into consumer or the goal is to eventually get into the four-stroke category?
Yes, this is an interesting situation. Alain will cover it since it's his business in a lot more detail. Essentially the industry went four-stroke, right? It was cleaner and everything. Now with the G2 introduction, we have a product that really challenges the preconceived notions of the industry. We believe there's going to be growth coming from that side of the business, but it's still a very large part of the industry that we will be competing with.
Okay. Last question, just in terms of sales product cycle, in terms of time to come to the market with the new product, can you talk a little bit about the timing it takes from designing to come to the market? Whether the strategy is to improve that lead time over time?
Right. The time to market varies according to the amount of clean sheet piece of paper sort of approach that you have with a product. If it's an improvement upon an existing platform, it's going to be a lot shorter than it is. Of course, our goal is always to be a lot faster because it's more efficient to be faster. You have to do it right, and especially when you are tackling brand-new concepts, brand-new segments of the market, it pays off to do your work upstream, rather than adjust as you go. Thanks.
You've done a lot of work digging into the heritage of BRP. What does BRP mean? Have you gotten to that point yet to define what BRP is?
It's still a little bit premature to make an announcement today. It's a little unfair because you and I had some conversation last night about this. I take the custody of the BRP brand very seriously. When you design a brand, you design it for 100 years. You don't design it as a program or a project that's going to last six months. Therefore, the investment in time in really digging and really being comfortable with how you articulate what's true about your brand is not something that you take lightly. I'm not rushing into this process. You mentioned I started doing a lot of digging, starting with our history and our heritage because I think that is an asset that we have that many brands don't benefit from, and we really need to extract that. History is not heritage. There's a distinction there.
We can read a lot about the history, in order to extract what's true and then what's going to carry forward into the future, is something that you really have to analyze quite deeply. We're not there yet, you'll be the first to know when we do.
What are you looking for in terms of M&A? What kind of metrics could we look forward to? Could you elaborate a bit on partnerships? What are you looking for a partnership? What will it bring to the company? Will it change the future of the company?
It's still premature, I think, to talk about what kind of partnerships and what kind of M&As. I thought it was interesting because people say, "Well, BRP should be doing M&As." Why? What? What type of M&A? I think that's more important to really identify what are those growth territories that are interesting, a good strategic fit for the BRP brand, what complements what we already have, then determining if it makes sense to go through it versus through an acquisition, mergers or building the capabilities inside. That becomes part of the strategy, we're just at the beginning of this effort. It's going to take several more months before we're ready to identify, pinpoint some targets.
You saw on the graph, on this graph particularly, that we have plenty of room to continue to grow within this product line that we have. We decided to focus on those because it's different for some of our competitor where they are fulfilling all those segments. For us, in the last few year, we've been focusing on trying to fulfill this because we believe it's leveraging our brand, it's leveraging our technology, leveraging the dealer network and leveraging the supply chain. That's why we're focusing here. Now the mandate of Anne is, we'll take a few more years to fulfill all those segments and what's next. That's what we're working on right now. That's why Anne started, what, 6 months ago now?
We are in the process of defining it, where we want to go, that's why we call it the next wave of growth. This will be the focus short-term. What's the next wave after?
Just maybe, Anne, going back on the brand images, is there a difference between the Ski-Doo brands, the Sea-Doo brands, the Can-Am brands?
From a perception from the consumer. Is the consumer really associating these brands with BRP right now?
Each of these brands are strong in their own right. I think that we're missing an opportunity to borrow equity from each other to see that connection that binds them together, being part of the same portfolio. Certainly, the connection to BRP is a lot weaker. This is something that we would want to strengthen over time. Thank you.
We do customers who don't realize that Can-Am is the same company, and Rotax is owned by BRP. That's the challenge that we have to make sure that the customer made the link, which we believe would be positive, but that's where we're coming from.
Our next speaker this morning is Mr. Chris Dawson. Chris is a General Manager for Global Sales and Consumer Experience, which is a role that was created from the merger of our international and North American operations. It'll be interesting to hear from Chris on that front. Chris is responsible for nearly 85% of all of BRP sales, and I guess with the revenue figures that José has shared for fiscal year 2021, I guess from this point onward, I will start referring to Chris as the CAD 6 billion man. With no further ado, Mr. Chris Dawson.
Impressive, Pascal, how you come up with that stuff. Very good. Good morning, everybody. Thanks very much, Pascal, for the introduction. As Pascal mentioned, we have a significant role to play in the company and our team. It's the merger of the North American and international divisions that just took place about 12 months ago now. It's a creation of a new divisional entity with P&L responsibilities for us as a team. Yes, we're responsible from the sales perspective, but we're also responsible for the worldwide marketing, sales, after-sales service, and distribution responsibilities for about 85% of the company's revenues. That, therefore, covers the Can-Am Off-Road, the Can-Am Roadster, Ski-Doo, Sea-Doo, and the Lynx brand, which has a significant market presence overseas in the international markets, and of course, the related parts, accessories, and clothing that goes with it.
In the international business, the one division that we have as well is the Evinrude responsibilities. We distribute and market the Evinrude brand as part of my divisional responsibilities, our team's divisional responsibilities overseas, outside of North America. José has alluded to the business profile. What you see here is the fact that we have a well-diversified business. We have roughly a split half and half between the seasonal and year-round products, augmented obviously by the propulsion systems and PAC. Not only a healthy growth, but a well-diversified business. As our business has been growing overseas, in fact, about seven or eight years ago, we were roughly 22% at international only of the company's revenues, and that has now grown to almost one-third of the company's revenues. That does add to the diversification element for the company.
Covering off the major strategic priorities for us, I'm going to start with significantly increasing our presence in the year-round business. We'll talk about the year-round business, the seasonal products business, where we already enjoy a strong market position and we intend to grow that as well. Developing a strong PAC portfolio to enhance the consumer experience, the optimization of our dealer network in North America, and of course, expansion in the international markets. Starting with the year-round products, the idea for us is as a part of our guidance, is growth of about 7% to 11% on the back of what has already been some impressive growth since fiscal year 2011.
The idea is to continue to expand our lineup in the year-round products, as José has alluded to, in new segments, and also start to augment our go-to-market efforts with even more spending and more aggressive go-to-market strategies around the world. Let's break that down a bit more and start talking about the off-road business. We've invested heavily in the off-road business and have gained share impressively, largely driven off the backs, particularly in fiscal year 2011 and 2012, with the entry into the side-by-side segment. Note that the side-by-side segment, this is the North American off-road vehicle industry. Side-by-side has now grown to where it's roughly half the industry. For us, the potential is significant, particularly when you look at the breakdown between the ATV business and the side-by-side business.
On the ATV side, we are already well established and have really expanded our lineup to cover most of the market segments. We cover about 85% of the market segments in the ATV market in North America, and arguably overseas as well, with a solid range of models, solid range of price points from the mid-CC, effectively, some in the low-CC, but also through to the high-CC. Breaking it down in the North American industry, you see that overall, the industry for ATV specifically, has been relatively stable over the past few years with a slight shift in the volume from the high-CC to the mid-CC.
One thing that's interesting is that for us, we have managed, despite the fact that we were the number 7 player of the major manufacturers to come into this industry, we already have carved out the number 1 position in the high-CC segment. We have a very strong position there. Now with the launch of the Outlander L, we are poised to grow significantly and have already seen sales grow by more than 40% since the introduction of the Outlander L. We intend, therefore, to solidify our position in the ATV market. We're also seeing expansion overseas in the international markets such as Germany, France, Scandinavia, and Brazil, among others, with, again, the Outlander L presence, which really has been a tremendous success for us so far.
On the side-by-side lineup then, as the side-by-side category has grown to be representing about 50% of the North American industry, you see the contrast that we have. Whereas we have the 42 models in the ATV industry, we're only established with about 20 models in the side-by-side category. There, when we first came into the category with the Commander, we went with what you might call a middle-of-the-road segment approach, trying to balance between the pure utility and the pure sport. That segment, we have already successfully created a niche for ourselves. The potential, though, is down the road. First step after that was to launch the Maverick product line and into the sport category. Recently, as you are fully aware, we've launched the first industry-wide factory turbo.
That represents a huge opportunity for us going forward, particularly from a brand leadership statement. That, for us, becomes very exciting. Of course, the question is, well, where do we go from here? This slide in particular is important. You see that the sport and rec ute categories, which is where we have the Maverick and Commander, respectively, represent sizable market opportunity for us, but another huge segment going forward is in the utility segment. That's a gap that we have in our lineup for sure. What you note is that we have, as I mentioned, carved out the number 1 position in the North American rec ute segment and number 2 in the sports segment. The potential is very interesting.
Also to note that in these numbers in the sport segment, the Maverick X ds Turbo shipped late in Q4, therefore, really aren't noted in these numbers. The real impact from the Maverick X ds will be seen in the coming months. Overseas as well, at the bottom of the slide, I'd also like to highlight this. It's a pride point for us. The combination of a strong ATV lineup and side-by-side lineup has propelled us to achieve the number 1 position, number 1 rank in the off-road market in Germany, number 2 rank in France. We have a very strong potential in Europe going forward. Let's switch over to Spyder and talk about Spyder, that's a particularly important product line for us. It's one of our babies, what I would call an emerging crown jewel for the company.
Now, if you had your best laid plans and you launched Spyder, you wouldn't have wanted to launch it just at the precipice of a major drop in the market and with the economic crisis. But that was what occurred. Certainly, that has caused us to have a huge adaptation in our original planning for Spyder. What you see is we really carved out an interesting segment and an interesting position in the motorcycle market. Mild growth over the years, some hiccups along the way as we've learned our way in the motorcycle market, but already have carved out a sizable business in the motorcycle market. The potential is significant, particularly when you look at where we have competed so far.
We've alluded to this before, but we decided to come into the market in the sport-touring and touring categories and expanded a bit in between those two categories with the ST product. The sport category is covered by the RS, the RT covers the touring category, and the ST is somewhat a hybrid in between. We have a decent price range there. We tend to have a slightly older clientele. The potential, though, going forward is with the F3. The F3 represents for us, this is a particularly important slide, and it was a question that was asked earlier on, the F3 will get us into the cruiser segment. The cruiser segment has a tremendous potential for growth for us. It is 2/3 of the motorcycle market in North America.
In certain select markets overseas, such as Japan, parts of Europe, it is also a significant segment. It represents a big opportunity. What we've seen in the North American industry is that there's been low single-digit growth due mostly to the touring and sport segments. That we hold, and this is what's important, the number one position. As much as we have come in at a tough time and we have come in with products that are outside of the cruiser segment, in the segments where we've chosen to compete, most notably the touring segment, we've already carved out a number one position in that segment. That talks to our ability to grab the attention of consumers and motorcyclists and other people, because of course, with the Spyder, we have introduced new buyers, what we call non-owners into the category.
It represents a significant opportunity for us going forward. We've actually expanded within our buying base, the motorcycle buyer base, by about 25%. It's quite healthy and quite interesting going forward. We believe the prospect with the F3 becomes particularly interesting. In terms of the shorter term and how we intend to focus on growth, we have taken a step to narrow our focus and be much more specific about how we're going to market with Spyder to create even greater impact, in particular, go to market with the F3. The idea for this coming year, the main marketing strategy, so to speak, is to drive awareness via paid media. We have a significant campaign going on within North America and select international markets as well. We're also increasing consumer trial.
We have several tour trucks going around the U.S. and Canada, where the focus will be to give consumers the opportunity to try the F3. We have a statement that we use internally, which is fundamental for Spyder, and that is, "Riding is believing." I believe several of you today are going to be going riding this afternoon. You'll get a chance to experience the F3. I think you'll find that it will change entirely your perspective on Spyder and motorcycle riding. Fundamentally, that riding is believing is what we believe will create a significant momentum for the F3. We're also reconcentrating efforts on the motorcycle industry and targeting the motorcycle shows where we get a significant number of our leads. We're enhancing the engagement of the network. José referred to dealer engagement as a challenge in certain areas.
Sometimes we have extremely engaged dealers who are propelling us forward. Obviously, in any large number of dealers, you're going to get those who are less engaged. One strategy that we have as well is our Spyder Immersion program, where we're bringing in salespeople from the various dealerships once these tour trucks come into an area. We're training those dealers, spending a full day focused on the dealer salespeople in particular, and getting them up to speed on Spyder even more so than they were before. Truly trying to inject them with a bit of what we refer to as yellow blood. Switching over to our seasonal products then. José alluded to the fact as well that we've had some healthy growth in seasonal products.
Building on what is already a strong presence in those categories, our guidance for fiscal year 2016 is to be up flat to 4%. Our approach going forward is to keep our meaningful innovation and ensure that we have a broad lineup attracting the various market segments. Of course, when you have a success like the Sea-Doo SPARK, it creates a greater desire to continue that wave and that momentum, and I'll allude to that a little later on. We also have as a major pillar is to continue our growth overseas. That's expansion in markets like Brazil, which really is a water-loving culture, markets such as China as well. Then in the snowmobile market, despite the challenges, when you look longer term, and I'll allude to it later on, it's of course building our presence in Russia.
Let's start off with the snowmobile business as we talk about the seasonal products. What you see here is that we have had the challenges going from season 2007 through season 2010, excuse me. Then some decent growth thereafter, particularly in the international market, markets like Russia and to some extent, Scandinavia. Our market shares have been relatively stable over the past few years. A slight decline season 2013 to season 2014, built on a lack of availability of product. That was the challenge that we faced. Clearly in the snowmobile business, the orders are taken very early in the year. So the dealers, together with us, we are relying on our market forecast for the potential, and therefore, you do end up with these circumstances from time to time when you might have underpredicted the market.
Fundamentally, what's interesting about snowmobile is that we have a dominant share in the snowmobile market worldwide. José alluded the fact that we dominate in every segment we do. In every single segment, we are the number one player in North America, and we hold a significant share in the international markets, which predominantly, of course, are Scandinavia and Russia. What we have been focusing on in terms of growth are, up until now, particularly the items like the new tune-able skis, the T3, and we intend to build on those into the future as well. We have, of course, the challenges that we're facing right now, and this is the difficulty with the snowmobile business from time to time, is you're subject to the winter. It was a more difficult winter in Scandinavia now two years running.
Russia also had later snow and earlier spring than normal, together and compounded by the economic situation and the political situation in Russia. For watercraft, this is, I think, emblematic of BRP and what we try to do. What you have is a market that was in decline and stability for a series of years. Then when we had the opportunity, we re-sparked the industry with the Sea-Doo SPARK. Of course, the coverage worldwide for the SPARK is truly incredible. It is one of those bright spots and bright sparks as well, but in our history. We have incredible media coverage and the consumer feedback on the Sea-Doo SPARK is very, very positive, and we are attracting a high number of first-time buyers to the category, and that really is a shot in the arm for the watercraft industry.
This is what you see here, that the Sea-Doo SPARK drove all of the industry increase in fiscal year 2015, all of it. We, of course, with Sea-Doo, with the Sea-Doo brand, have been the industry leaders for over 10 years, and we continue to improve our market position with products like the Sea-Doo SPARK. In international markets, with the launch of the SPARK, we gained share in essentially every single market around the world, and have seen significant increases in markets like Australia, Scandinavia, Russia, Brazil. Moving on to PAC. The PAC business for us represents a key area of growth going forward. Our guidance from a couple of years of some stability and then growth is to grow a further 10%-15% this coming fiscal year.
We're doing so with an emphasis on accessories in particular, expanding our accessories portfolio and also increasing the number of vehicles that, at launch, have accessories ready to go. What you see right now is that the accessory business for us represents about a quarter of our revenue base. We have 950 accessories currently available for our powersports owners, of which 250 were introduced in model year 2015. You see this emphasis on both new accessories to expand the portfolio. Another component of it is to have it ready at launch so that we're a step ahead of the competition. Overall accessory dollars per vehicle grew at a compound rate of 12% over the past five years.
We believe we have a significant basis to compete and become even stronger going forward with the innovative features, but with systems like the LinQ system, offering seamless integration with the vehicle and ease of installation, it represents a big opportunity going forward. That's what you see here on this slide, particularly when we've launched the F3 and some of our off-road products with the LinQ system. We truly believe that personalization is a key to creating that ultimate riding experience, and it's a big opportunity for us. What we intend to do in terms of the focus on success is a better integration of our PAC teams with the vehicle development, tight upstream collaboration with our suppliers, and a strong partnership with our dealer network going forward.
We really believe that we're well positioned to increase our penetration of the accessory market going forward and ultimately to grow our business. Next major pillar that José alluded to was the optimization of the North American dealer network. That doesn't mean, of course, that we're not focused on the international market. Clearly, as we expand in new markets and in certain select markets overseas, we also focus on developing our network. A lot more of that focus is on developing the quality of the dealers and less so necessarily about expanding dramatically the number of points, although that's an effort as well. Within North America, the effort is on two fronts. Clearly growing the network, but also developing in terms of the quality. The quality of the network referring specifically to what the consumer experiences.
It's that consumer experience focus that we're trying to bring. Here on the slide, you see some examples of what we believe is a world-class premium showroom environment. That's something that we are expanding slowly with our existing dealers, encouraging them to invest, to build up for their consumers what would be an impressive showroom environment rivaling certainly premium products and some auto industry competitors. What you see for FY 2015 is that we signed a total of 76 dealers. 31 of those were in the South and Southwest regions of the U.S., 72 off-road dealers, and we increased our Side-by-Side and Spyder network coverage by 10%.
One of the things that we would like to highlight, though, is that beyond just trying to expand the number of dealer points that we have in North America, and particularly in the United States, this is a particularly important slide, is that we intend as well to increase the number of dealers selling our product line. That's essentially adding lines to existing dealers. That is a particular focus, and what you see on the slide is that over the years, from FY 2013 to FY 2017, the number of dealers that have our product line, that's a combination of new points and selling or adding a line to an existing dealer, has grown by 50% roughly for Spyder, 40% and 25% respectively for Side-by-Side and ATV. Significant overall growth.
We believe that that focus on the incremental lines added to dealers is a very healthy one. One thing I'd also note for us as we go forward and we talk about expanding the number of dealer points, we had some of this conversation last night, an important point for us when we're talking about the metrics of achieving a year-end target, giving out a target for the number of new dealers that we intend to sign then being able to chase that target, the focus is on trying to achieve a certain number by the end of the fiscal year. One thing to note, of course, is that the new dealers that we are signing are in the off-road predominantly and in the Spyder business. Those businesses tend to make new product announcements in the late summer, early fall.
We tend to have our dealer meeting in clubs with significant new product news at that time of year. Often, new dealers coming into the pipeline will want to wait to see the new product offering before deciding to take the plunge and join us. Once they come to the club and decide to sign, often the process is at least six months to be able to sign them. You can imagine that therefore, we're getting a lot of the dealer signings coming very late in the fiscal year, Of course, that could spill over into the following fiscal year. What I'd like to emphasize, I think this chart does it, is that really our focus is on consistently growing both the number of product lines being carried by our dealers across North America and the quality of those dealers over time.
We're very confident both in the progress and the analysis that we've put into it, the progress we've made, and in the direction that we're going. Lastly, in turning to the international markets then, this is a slide that essentially tries to break down how we manage the business. We view it in five distinct geographic entities. It's the North American business. We have a Latin American head as well. We have a leader for Western Europe, Middle East, Africa, one for Scandinavia and Eastern Europe, including Russia and Asia Pacific. The idea now, as was referred to up front, is to be able to capture the synergies available to us by operating as one entity worldwide, being able to manage and optimize more regionally when the conditions call for it, such as when you face a bit of an economic shock in places like Russia.
The international markets for us, of course, continue to be a key lever with international revenues since 2011, fiscal year 2011, having grown at 8% compound rates, at an 8% compound, excuse me. That despite the regional challenges or economic shocks that we face. That's, of course, we often think of Russia as being a major one, which is very true, and parts of Eastern Europe. Frankly, it's also true when you had the surprises following the economic crisis or as part of the economic crisis in Europe. We had a very difficult time then at that point. Latin America for us. Latin America has been a large business for us.
Of course, with both the political climate in certain markets in Latin America and some of the economic difficulties in certain countries in Latin America, despite the fact that the culture is truly in favor of powersports and represents a prime opportunity for us, clearly, those are shocks that we need to absorb. We've made the decision that we intend in these key markets, such as Brazil, that in these key markets to continue our focus, to believe in the longer term and to survive and weather, therefore, the shorter term shocks, and do our best to try and mitigate that impact. I'll speak just briefly on China and the China joint venture. Very pleased about the fact that we had announced the joint venture back in June. We indicated the go-live date was February 1st, and we met that timing.
We have a very strong partnership with our former distributor, now our joint venture partner, Smooth Marine, combining our two expertises, their local market knowledge in China, together with our market knowledge of dealer development or category knowledge, excuse me, of dealer development and go-to-market expertise. The Chinese market represents a prime opportunity for us going forward. It has significant growth potential in the watercraft business and in ORV and potentially down the road in the Spyder business as well. What you see is that to date, we have 19 dealers. We're expecting to grow the number of dealers to 30 dealers by the end of fiscal year 2016.
We have a very strong team based in Shanghai. I believe very strongly in the potential of our business there, particularly because building on some of the learning that we have from other markets where we have entered, we have the opportunity to go in, ensure we have a very strong dealer network. Frankly, if you were to enter any of the dealerships or most of the dealerships that we have in China, you would say these are world-class quality dealerships. That is something that we have focused on. Rather than just simply going out and signing anyone and everyone who might be willing to participate, the idea for us is to really be able to work with dealers and have them grow and understand how to be successful in business with a focus on the consumer experience.
Part of that, of course, is the showroom and service environments. Closing out a bit on the Russia situation. Clearly, the Russia current crisis has been a surprise to many. We are not alone in sharing in that surprise. Really, when you see the effect of the currency devaluation versus the ruble, the amount of inflation, the impact on consumers' purchasing power is significant, of course, as is the ability of both consumers and dealers to get access to credit. That becomes a significant challenge going forward. For some of the consumers, when I visited, and you get some of the anecdotes, you realize that they've seen this story before. Therefore, from a consumer perspective, yes, they will curtail purchases, they will pull back, it's not as significant as perhaps other crises that they've lived through.
It clearly represents a challenge for us to try and manage going forward. We, though, are committed to this market. We believe that this has a huge potential going forward in Russia. We've already seen that our business can grow to impressive levels and very profitably as well. Our focus right now is on preserving our market position, particularly with products like the Outlander L in the snowmobile category, as well as strengthening and supporting our dealer network throughout the country, together with our distributor, Rosan, and maintaining a solid relationship with our distributor. Ultimately, within Russia, we anticipate sales to drop by about 50% versus the fiscal year 2014 level. I will just repeat that it's extremely volatile from a forecasting perspective.
Things can change, we're seeing that we have many different input sources in Russia, including in the automotive industry, and we're in line, roughly speaking, with the declines that they are forecasting. Clearly, a lot of those same individuals are saying they're taking it day by day or week by week. Just to conclude, despite the fact that I might have closed on what might be a challenging situation, I'd like to bring the overall by saying that we have a well-diversified business, and that diversified business really helps us mitigate or start to soften the impact of certain of the shocks that we face around the world, for example, Russia, but also Latin America. We intend also to focus on innovation, product innovation, PAC innovation, as well as aggressive go-to-market strategies to build global business.
We have a strong portfolio today, an existing portfolio, trust us that we have a strong pipeline of new products coming forward as well. From a geographic focus, that's the other vector of growth for us, whether it's from the Southern U.S., where we have a great and prime opportunity to expand our business, particularly in the four-wheel products, to the emerging markets such as Brazil or in Russia and China. We really believe as a company that we have a significant runway for profitable growth. With that, I'll conclude and take any of your questions.
Thanks. Chris, I just want to ask a few questions on dealers. To pick up dealers, usually there are not many new dealers coming online these days, so it depends on usually dropping someone else. Who are you displacing at these dealerships? On a dealer experience, how do you incentivize these dealers to present your product well and make those investments rather than sticking a Spyder in a corner, so to speak?
Good questions both. Certainly, there's attrition. There are dealers in various areas that will either be choosing to get out of the business or that we will fundamentally work with as they choose to leave the business. That's broadly how we work with them, and it can be a very long process, particularly in the U.S., to be able to end a relationship with a dealer. For us, of course, as I mentioned, in the business, there's a reference to a 20/80 rule. In our category, it's more the 50/85 or 50/80 rule, where your top 50% of your dealers represent the bulk of your business. What we try and do is strengthen those.
We're trying to strengthen those top-end dealers and add lines in new areas, either with existing dealers of BRP or with new dealers to really reflect the potential growth that we have. In terms of incentivizing them, really, it comes down to having a discussion with dealers, being able to show them the product, ensuring that their product portfolio, including PAC, is strong. Being able to design with them, you saw the showroom environments that we have. We will work with them very carefully and try and carve out a BRP zone in these stores. That combined with training for those dealers represents the best opportunity that we have to ensure that for new dealers coming on, that they have a strong running start to building the business.
As José alluded to before, it does lead to ramp up, and you're referring specifically to Spyder in this case, but it does lead up to longer ramp-up times.
My first question, I kind of allude to displacing other brands at a multi-line-
Oh, you mean getting other manufacturers? Sure.
How many new dealerships can be online?
Right.
To get into those dealerships, you have to displace the brand.
I see.
Who's losing there? Is it Suzuki or someone else?
Yeah, it's honestly a mix, and it would not necessarily be that we would go in and displace them entirely, meaning that the dealership chooses to eliminate the competitive brand. They would choose to carve up existing space. Some of them expand their showroom space. They will add on to their building. Honestly, that's a very mixed response that I would give you. It's a combination of effects and a combination of competitors that get affected.
In terms of your international dealer market, are the dynamics more similar to Canada or the U.S. in the sense that there's exclusive dealers versus multi-brand dealers?
Yeah, good question. We very purposely overseas are trying to focus more on the BRP-only stores. That represents a bigger share or a bigger proportion of the business and certainly our attention with those dealers. This is trying to build on the learning back to not just going in there and deciding to quickly ramp up the number of dealers as if that's going to solve longer-term growth opportunities or challenges, but really trying to take it in from the learning of a market like North America, where you have very strong dealers in pockets, and it doesn't necessarily mean that you have to try and expand all the time and have a multi-line environment. There is a challenge with that, which is the multi-line environment, meaning multi-competitor environment, of course, can bring more traffic, and that's the challenge that you always face.
For us right now, the trade-off has been more towards a tendency for a BRP-only store.
Okay, that's great. Just in terms of the international sales, looking at the numbers, CAD 100 million in Russia is the forecast for 2016?
I'm going to leave.
Yeah. In Eastern Europe, in 2014, we had about CAD 200 million of top-line. Russia was the major part of it. We don't disclose the revenue by country, Russia being a significant part of it, we're looking at it to be down 50% over 2014. The range of CAD 100 million would be fair.
Is it still the one distributor that you're using?
Yes.
Yeah, it's the one distributor we're dealing with.
Okay.
Chris, what's a typical CapEx when a dealer adds a product line for the dealer? How does it impact his servicing? He has to be trained, I guess, the staff to look at. What's the impact? When we add a product line, what's the retention rate?
Do some dealers then decide after a couple of years that that product line hasn't worked? What's the retention rate after we've signed up a dealer and added a new product line?
Yeah. Good question. I'll answer in somewhat generalities, because really, it'll differ by dealership. Broadly speaking, if it's a greenfield, the CapEx that they would have to spend can be significant, and that becomes part of the difficulty when, if they're truly building up a new building just for BRP product lines, then the equation becomes very different and the cycle to sign and get that dealer up and running is considerably longer. That doesn't tend to be the majority of our cases, particularly in North America. Overseas, it does. In North America, it's much more dealers, as was alluded to before, expanding in an existing store, maybe having some CapEx to expand the store a bit, or certainly to try and carve out an area for the BRP zone. In terms of the retention, actually, our retention is very strong.
We don't tend to have that many dealers. Once they've decided to embark with us, we don't have that many dealers that then, a couple of years on, choose to terminate the relationship. We've been quite good. Of course, there's always room to improve, quite good at maintaining those dealer relationships, both on the basis of offering them high margin products for them to be able to make money, also in terms of how we do business with them.
I know. Maybe just one question. I know we're running short on time, I like your slide number 21, where you show the breakdown in terms of snowmobiles between Europe and North America, in terms of the industry. What I've seen here is that since season 10, there's been quite a strong growth in Europe, and it's been much more stable in North America.
Yeah.
Can you just talk a little bit about what the dynamics are there? Is it because we're dealing with economies that are developing a little more rapidly than in North America, or what's been the dynamic to drive that?
Yeah. A huge component of that has been the growth in Russia. We've seen a big growth in the Russian snowmobile business. This is part of our attraction to markets. We're talking about Russia, but it could be Brazil with the emergence of the middle class. The potential going down the road, when you have a very strong set of brands, a very strong brand reputation in the market, together with, in Russia, what we believe is the strongest powersport network of any of our competitors, it represents a big opportunity. We've seen some of that then materialize or manifest itself in terms of growth in the snowmobile business. You do face, for instance, in North America, the weather impacts, the snowfall impacts. The fluctuations year to year can be significant.
How does your market share for Lynx look like in Europe?
Well, the combination of Lynx and Ski-Doo, we represent over 50% of the market.
Is that Europe?
Yeah, that's Europe.
Looking back at your slide eight, where you show the North American ORV industry, what should we expect in terms of ORV growth to come back to previous peak? It seems that we are still at 50% of previous peak. Where do you see that market evolving? Also, the SSV conversion to ATV, the mix that we should expect in the future?
Yeah. What we're counting on is continued growth, as Sébastien alluded to early on, we don't expect, and we are not trying to plan for, they call it the magic scenario, where suddenly everything just gets rosy again. We're trying to present a conservative industry growth. Then, of course, if things materialize better, that's terrific. That becomes gravy for us. The side-by-side business, we believe will continue to represent a greater and greater share of the overall ORV market.
About 10 years after the peak of the ATV industry. You're seeing some replenishment or some replacement happening from ATV to SSV. We think that the SSV product is well positioned for continued growth as ATV owners are going to be replacing their ATVs and migrating towards this.
Okay. Just a quick one on China. You mentioned that main growth drivers are Sea-Doo and Can-Am. However, the snowmobile seems to be the second largest market.
Yeah.
Is it because you're already well established?
Yeah
It's someone else that takes the lead?
No way.
No. Okay.
No. Kidding aside, it's because we are well established there. Among powersports manufacturers, just broadly speaking, we have one of the most significant market positions. In that, I'm even including some of the major motorcycle manufacturers as a point of comparison. Even amongst that group, we have a strong position across the categories. In snowmobiles particularly, it's less of a consumer market. They have the expansion in the number of ski resorts that has gone incredibly wild. A huge number of ski resorts. For those, it's a lot of utility snowmobile products that they're buying in. It's less about a consumer market, and we don't anticipate the growth there to be as significant. It's more of a stable business. Truly, from a consumer angle, we view the growth as being watercraft and off-road. Do you want to pipe in? Yeah.
Just following up quickly on the China opportunity. Moving from 19 dealers to 30, I think you mentioned. Looking at longer term over that five-year timeframe, without specific numbers, where do you see that trending? How big is the opportunity there? Then secondly, what's the margin profile like in that market? Where presumably there's some stronger low-price competitors.
Yeah. First, on the network side, the continued expansion is what we foresee, and particularly as the market develops. In the watercraft business, there is a lot of opportunity going forward. It's not just coastal, but of course, that will take time. The further inland in China that you go, the more difficult it becomes. There are pockets throughout China that we see as an opportunity, and watercraft is one, but particularly off-road. Off-road represents a sizable opportunity. However, it's also in trying to predict the timing of demand, and also being able to manage the network. What we've tried to do is have a dealer expansion strategy that allows us to be able to manage that group of dealers as effectively as possible and not expand beyond our capabilities too quickly.
Secondly, of course, ensuring that, back to the question on whether we have dealers that join and then fall out, you don't want to sign up dealers who have to invest the CapEx and then know that they're going to have a higher likelihood of failing in a few years. That's a challenge for us. But just broadly speaking, it is continued dealer expansion over the five-year window. In terms of the margins for us, we don't disclose, as you know, but it's a healthy business for us. Clearly, we're in the investment phase, though, where we're expanding. Right now, it doesn't represent a significant benefit for us. But going forward, we expect that to develop quite nicely as you get the scale effect. Thank you very much.
Okay. Thank you very much, Chris. We're running a bit behind schedule. I'm the only thing that's standing between you and coffee. Let's break for five minutes, reconvene into the room, and then we'll get going. Thank you.
Okay.
Good to go. Great. Thank you. Okay. Well, welcome back. Next speaker this morning is Alain Villemure, a 20-year veteran with BRP. Alain is the general manager of the Marine Propulsion Systems business. Interestingly, I guess unlike Anne and Chris, who have crossed paths at Ford Motor Company, Alain Villemure is a General Motors alumni, having worked there for something close to 10 years, I believe. I was thinking about the best way to introduce Alain, and the word that came to mind was enthusiasm. Quite honestly, he has a good story to tell with the Evinrude E-TEC G2, the recent product launches that could turn out to be the greatest thing since sliced bread, no less. I guess with that, I'll turn it over to Alain.
Thank you, Pascal. Good morning. I'm going to talk about the Marine Propulsion Systems division. We don't talk quite often about that portion of the business. That's one that will get more attention, I'm sure, in the future. My objective is to present the context of the business as well as the growth opportunities that we have as a business. First, let's position the MPS, or the propulsion system, or MPS within the propulsion system. Propulsion system represents about 11% of the BRP revenue, and Marine Propulsion Systems fits in that segment there. You see the Evinrude outboard engine as well as the Rotax jet propulsion systems. We used to call the division the Outboard Engine division when I moved to the U.S., but we changed name because now we're offering two propulsion system.
The other reason why we changed the name is to add the component of systems, because not only we want to supply engines to the marketplace, but a complete system that have a greater impact on the consumer experience. That's some way a departure in the market, the way the market is positioned right now. The Rotax propulsion system, Thomas will cover later today. If we look at the highlights for that, one thing that is very important is the fact that as a propulsion system supplier, we're not competing with our customers, with the boat builders, contrary to our competitors. It's a clear play where we provide propulsion systems trying to get them a better consumer experience to their customers. That's a very important factor there. I have the responsibility worldwide for the product development as well as manufacturing operations.
On the sales side, it's about the North American market, That's what we're going to focus on. As far as the sites, the main site, the main campus is in Sturtevant, Wisconsin. I've been based in the Midwest now for the last two and a half years. You can see by my action that it greatly improved, I hope. The main campus is there. It's a very nice operation. We have everything on the same site. We used to have engineering in Waukegan. That was moved about two and a half years ago. We have all the functions integrated into one site, That's very effective. If we look a bit at the history, That's quite a rich history and a rich heritage in that perspective, as Anne was pointing out earlier.
The outboard engine was invented by Ole Evinrude in 1907, That's similar to Joseph-Armand Bombardier inventing the snowmobile several years ago. We benefit from that heritage in our company. You see, I won't cover all the elements of the history of OMC or Evinrude within OMC, but you can see that in 1986, they reached revenues of CAD 1.2 billion. That's a combination of boat and engine supply at the time, and they were supplying different types of engines at the time. Reached a very high revenue. In 2000, there was a bankruptcy of OMC, That's where we came into play. In March of 2001, BRP acquired the assets of OMC, but only acquired the engine assets of OMC. The boat assets of OMC were acquired by Genmar, mainly at that time. I mentioned in the history there in 2001, that was a bit of an issue.
This bankruptcy uncertainty and turmoil created an opportunity for competitors to get more of the package business, sign long-term agreements, sometimes acquire some of those brands, which affected our penetration still now in the package side of the business. I'm going to cover that in more details. From 2003 to 2010, we were busy implementing. We made the technology. One of the reasons of the bankruptcy was the Ficht technology with the issues at the time of launch. We've relaunched the DI technology with a more reliable and more durable system called E-TEC, We were busy implementing that on all horsepower segments for several years. Once that was completed, we could really start looking at creating a product that was a true BRP product. The first blank sheet product for BRP with the BRP DNA and the market-shaping aspect and objective with that reinvention.
That's the G2 launch in 2014. We're going to cover that in more details. If we look at the health of the brand, the Evinrude brand is quite healthy. This is the NPS score. It was introduced by Anne before on all the brands, but you can see that we're leading from a net promoter score in the industry right now, and by a good margin. That's very interesting. Moreover, the boat partners, when they're using our engines on their boat, they have a stronger NPS with their customers. That's very interesting. It means that the engine and the power pack from Evinrude really has a positive impact on their boat experience, the customer experience. Now the question, and we had discussion earlier about the four-stroke, and the chart from Anne was begging the question, I guess.
Why is it that we're going in the two-stroke direct injection? It's not two-stroke, it's two-stroke direct injection, obviously. When you look at it, this is the best technology for two of our key industries, being the snowmobile industry and the outboard industry. Outboard is all about torque and fuel efficiency. There's no better way to get torque than use a two-stroke engine, and the fuel efficiency and the emission with the direct injection. That's what we deliver with Evinrude E-TEC. On the snowmobile side, it's all about power to weight. Power to weight is really king in the snowmobile, off-trail, even on trail. Two of our key industries are strongly benefiting from that technology.
What it allows us to do, or what it allowed us to do, is to continue investing in that technology because we have two industries, the combination of the volume, but also the fact that each product brings its own challenge in terms of the technology. The snowmobile power density is much more than an outboard. That made the system much more reliable in order to make it work for the snowmobile, allowed us to make the technology much more reliable over time. That's something that we benefit from. That's the technology shelves that we have at BRP. We have all those technology, and we can select the best technology. Question was asked, when we launch again and the G2 in last June, saying, "You guys are going to four-stroke." Now you see the reason. We could have selected the four-stroke path.
We selected the two-stroke DI because we feel it's a better technology for that application. If we look at the industry, the industry is on a nice comeback following the crisis. It went down quite significantly, but you can see that we have a constant and steady growth coming in the industry at the rate of about 6%. That's quite interesting for us. If you look in terms of market share, it's pretty much flat. You see a blip when the crisis came because the repower component of the market was more important at that time, and that's a market where we play with our network in a bigger way, and we're going to cover that. That explains a bit the fluctuation that we saw. The fact that we don't have the package access that we need for growth at this point affected our market share.
If you look at the growth right now coming mainly from South Atlantic, we didn't have a lot of package agreements in that marketplace. We're solving that right now because we've signed quite a few boat brands that are operating in that market right now. If you look at the breakdown of the industry by channel, you see that the industry is basically 75/25, 75% package, 25% repower. If you look at our distribution, we're more or less 50/50. It's our challenge as well as our opportunity. We have to further develop in the package side, we're going to share some numbers with you later in the presentation. If we go further in the breakdown of the package, you see that a portion of the package, we don't have access to.
We evaluate about 45% of the package market, which is captive with our competitors, we have, therefore, access to about 55%. That number grew in the last few years, we believe it's going to grow further in the next few years. That's really the space that we can play and further develop. How do we create the pull? Then we're going to talk about that later on. Now, the key strategic priorities, and we're talking about pull, is to create the market pull through steady introduction of market-shaping products. The G2 is a good illustration of that right now.
The second element is, we were in the sport boat business for years, and we were asked many times, "Can you supply the power pack, the propulsion power pack?" We had many requests for that, and we always said, since we're participating, we don't want to create more competitors. Once we exited the sport boat, developing the jet propulsion business became a nice opportunity for us. It's a good combination in the MPS division because we're many times talking to the same dealers and the same partners, boat partners. That's one more bullet in our arsenal there to further develop the network. We're going to cover those both. If we look at the G2 as a market-shaping product, if we look at the performance aspect, unbelievable performance.
20% more torque and 15% better fuel economy, 75% lower emission compared to the best four-stroke in the same segment. If we look at the 200 to 300 horsepower segment, that's no small achievement. That's a huge benefit from a consumer standpoint. That's not the only thing. If you look at the design aspect of the product and delivering a superior consumer experience, this is the first engine that allows you to match the color of your boat with your engine. It seems quite obvious once it exists. It was a paradigm, a strong paradigm in the industry. Why is that paradigm? Because the outboard manufacturer want to make life easy for them. They don't want the proliferation of SKU.
We needed to design very differently, but also establish our supply chain in a different way, where we deliver an engine without panels, and the dealer orders the panel once the sale is made and the customer has made its choice. Then four or five days later, the panels comes to the dealer with the right accent and the right color. It needed quite a reinvention. Now it looks so obvious that that was the thing to do. Other elements is the clean rigging. That's the only engine where you don't have hydraulic steering elements on the boat in front of the engine. The power steering is integrated on the engine with the new LX concept. We have a clean rigging. One tube, and that allows the boat builder now to use all the real estate behind the boat.
That's a big benefit for them and for their consumers. Another element, the i-Trim Assist, a way to assist the customer in trimming, which is not an easy experience when you're not an experienced boater. Even for experienced boater, some of them are still having issues in trimming the boat. That was a good concept for us. You see the BRP angle there. We're designing products, complete products. We're not just supplying engine as a company. That's the type of innovation that you can expect from a company like us. And there's the lifetime value that is already known from the E-TEC side of things. Truly a market-shaping product.
If we look at the consumer from a poll, the poll from consumer standpoint, we went with a very innovative approach in our marketing strategy and basically addressing with key steps, all the steps in the marketing funnel. We've increased quite significantly our presence in the boat shows, more corporate boat shows, heavier presence, more partners showing boats and engine at the shows. That was a big element for us. We've created the chooseyouretec.com. That's the first outboard engine site that allows you to configure your engine with the power, with the color, to really make the engines the way you want. You can end up with a PDF file, an email you can send to the dealer to say, "This is what I want for an engine." On that, we have also brand message.
We have a lot of information for the customer that is right now shopping for that type of purchase on the internet. Most of the time we do. That's a very interesting tool that we came up with. Far, we have over 300,000 visits on the chooseyouretec.com site. Just to put things in perspective, the industry is about 250,000 engines a year in the U.S. That site, though, is a worldwide, all the consumers from everywhere in the world go on the same site there. If you look at the award that we won, José touched on that, but we're very proud to say that we won the NMMA award for the outboard engine category with the G2. More surprisingly or more exceptionally, we won the Red Dot award for an outboard engine. This is quite exceptional in my view there.
We also won with our marketing campaign, the Marine Marketers of America for our infomercial, as well as the chooseyouretec.com as being the best tactics that they've evaluated last year. Quite a good momentum there. If we look at the poll from boat builders and dealers, I mentioned that early, for the last year, we signed 20 boat builders, mainly after the club, after we have introduced the engine to the market. In the few years before, we barely signed boat builders. That tells you how significant of an impact G2 was for us there. We also signed 78 dealers, and we signed about eight dealers the year before, just to put things in perspective. That's truly a game changer for us. What we're looking at doing there is adding about 150 to 200 dealers by the end of fiscal year 2019.
That's a good target for us, and that's going to be making the product more accessible to more consumers, more brands of boats in different locations. You see the runway that we have with a lot of the new partners, as well as the existing partner on that slide. The second aspect is the jet propulsion system business. Really, we're the only significant OEM supplying jet propulsion system in the industry. You have smaller players that are very small in volume. A lot of interest when you think that we've supplied about 500,000 of those units with the jet boat and personal watercraft. This is by far the most volume on the marine engine in the marketplace. That's something that is really creating some interest.
The natural market for the jet over the years, because of our presence, because of Yamaha presence in the sport boat, was the fiberglass runabout boat from 16 to 25 feet. That category was always compared, when we were monitoring the market, with the sterndrive and the inboard, all the inboard type of propulsion system, basically. You see in yellow, that was the jet, with the model year seven, pre-recession peak. You see how dramatic the reduction was for sterndrive, but the reduction was not as close as being as dramatic on the inboard with our ski boats and the jet propulsion system. The model year 12 is the last for sport boat at the full year of volume there.
You can see now looking at model year 14, that we have potential for growth, and we can also expand on that volume by having partners that we're going to cover, like Scarab and Chaparral, that are more mainstream boat brands that probably will create more market for the jet over time because of the customer base that they have. We look at that as a very interesting market opportunity. If we look at the significant advantage or the benefits of jet drive, you have the packaging at the bottom, you can see in yellow the jet drive where there's no prop, and you can see that the engine is very compact, allowing for more seating room and a better platform access.
You see on the right, the sterndrive, which has the prop in the water, and as well as a much higher package because you have the gearbox also in the package. You see much more room. The real estate that you can use at the back of the boat is quite different. That's why you didn't see the same reduction on jet that you saw on sterndrive. That's one reason, not to mention the pontoon switch that happened over the years. A lot of benefits on the lower cost of that technology versus the sterndrive, allowing you to have more passenger, a better access to your swim platform. A lot of benefit. We see those benefit not only good for the existing market of the runabout.
We feel that there's benefit in other segments that we were not addressing before because we were not offering the power pack. Very interesting. Now if we look at the progress that we've made in the last 2 years is quite significant. We have 3 brands that we're working with right now. Scarab, that was a relaunch of the Scarab brand by RBH, Rec Boat Holdings. They have now 12 models with 4 hulls length. If you look at Chaparral, a very well-established brand as well in the marketplace. They launched a Vortex jet boat line, 6 models, 3 hull lengths. The Glastron that also have a 2-jet version, 2 models, 2 hull lengths. You see that we have very good brands, solid brands in the market.
We didn't get the full volume right now because they were just launching in the last 2 years, and their lineup is getting complete as we talk now. We're going to see more penetration in the next program year for sure. At the international level, we're also working. We have quite interesting deals in the making right now. We cannot talk about that, Chris is working on very interesting deals with his team at international. We see a prospect, and a prospect in segments that we haven't addressed before. That's going to be also very interesting. We want to expand within the current fiberglass bow rider, we want to expand also in other segments. I mentioned about the network play on that side.
We've signed 221 dealers of Chaparral, of Rec Boat Holdings in the last 18 months, of which 80% are selling outboard engine, but very few are selling the Evinrude. That opens up a lot of possibilities for us. Another play from a growth standpoint on our side. That's the story. In conclusion, if there's a few elements I want you to retain from that, the fact that our positioning is a clear play in the industry where we supply multiple propulsion system without competing with our customer. That's something that allows us to get to offer a more complete consumer experience that the boat builders partner can benefit from. That's one thing. You see that G2 is really creating momentum. The proof is the number of boat builder as well as dealers that we were able to sign in the last 12 months.
We're very encouraging from that standpoint. The pace of innovation, of market shaping coming out of Evinrude will be much greater in the future. That's going to be more similar to what you see on the other BRP product lines right now. That's a very good access. There's the business development with offering the jet propulsion system in the natural market, but as well as new markets that we can develop. Thank you very much, and I'm happy to take questions.
Can you explain the dynamics in terms of, you sign OEMs, there's also dealers. Would a dealer essentially carry different boats from, for example, Chaparral, I think you mentioned, and the customer would then choose which one he wants? How does that dynamic work in terms of how they choose?
How they choose? I'm sorry.
You're signing OEMs on one end, you're also signing dealers.
Yes.
What's the interconnection between these?
Okay. That's a good question. The pace at which we can increase the network is a bit different than on the parts side because we have the boat builder. For us to develop on the package side, we have to develop with boat builders that are working with us or will work with us, then we have to go sign each and every dealer that we're interested in signing. It's not automatic. It's not because the boat builder offers the Evinrude engine that all the dealers will elect to take the line. You have to go and work each dealer one by one. A bit different on the repower side, we have access to the dealer directly, so we can sign a repower dealer without that step, obviously. On the package, that's the addition that we have to work on.
On the dealer side, it seems the biggest impediment is servicing and training their technicians to work on your engines. What kind of programs do you have in place to help them along with that?
Yeah. For dealers that are ready to commit to a reasonable and significant enough volume, we offer help for this initial phase of training and the cost of training and getting the tools and all that. One thing that I want to mention is the Evinrude E-TEC product line is much simpler than all the other competitors because we're using the same injection technology from 25 horsepower to 300 horsepower. Our competitors are using different technology. That requires a lot more training. When you're trained on the EMM, on the injection system, on a Evinrude engine, you're basically trained on all the horsepower settings. It's not as much of an effort. It's yet an effort, and we have ways that we support, provided that we get to the level of commitment.
We'll be with you in just a bit.
Okay.
Alain, in terms of outboard engine, you are only in the 200 horsepower to 300. What is the percentage of total sales among the outboard engine that comes from that segment, and how sizable or the complexity of the investment to developing the low horsepower segment?
The 200-plus is about 20% of the market. We're not addressing yet the big portion of the market. It's a significant portion. It's good in terms of margin, obviously, getting with the iron element to it. Your question is good. Our intent is definitely to cascade the G2 benefit and technology in lower horsepower as we go. We won't take five years to do it. We won't take six months, but we won't take five years to do it. We have a good plan. Thank you.
Sorry about that. [Non-English content] Merci beaucoup, Alain. We'll just save your questions, and we'll try and recover the time. We're running a bit behind schedule. I don't want to waste any time for the Spyder ride and the plant tour. Our next speaker is Sébastien Martel. Sébastien joined BRP in 2004, and his career has progressed rapidly to ever-increasing responsibilities within the finance organization. Most recently, Sébastien has led the IPO process before being appointed as Chief Financial Officer. As the head of the finance function, Sébastien's focus is on three things: costs and margins, costs and margins, and costs and margins. With that, I'll turn it over to Sébastien.
Thank you, Pascal. You know what I'm going to be talking about this morning is going to be cost and margin. Actually, I will try to expedite through the presentation. I did have three topics for this morning. One, give you just an overview of the guidance that we announced with our Q4 results, talk about margin improvement, and also just give you a brief overview of the financial position as of January 31st. As you all saw on March 27th when we announced our guidance, we're looking at the total company revenues up 5%-9%, driven by our four product categories, more specifically year-round products. We're seeing good growth in the year-round products coming from the growth in the side-by-side business and also with ATV, with the introduction of the Can-Am Outlander L, but also with Spyder.
Spyder, as Anne mentioned and Chris has mentioned in their presentation, Spyder with the F3 addressing the cruiser segment is for sure an important area of growth for BRP this year, but also in future years. Seasonal products, we had a great year in seasonal products in fiscal year 2015. Strong snowmobile season in North America. Strong PWC season, especially with the introduction of Spark, which was above our expectation for the first year. In our planning for next year, we're looking at flat to up 4%. That is driven by lower deliveries in North America. We replenished the inventory levels in fiscal year 2015. Also a decline in revenue from Russia. As Chris alluded to in his presentation, the market is soft and down 50% versus fiscal year 2004.
I think Alain did a phenomenal job talking about the G2 with the Evinrude and also the jet propulsion system and working with our partners to grow that business, and that's what's going to drive the 7%-10% growth in revenues for the propulsion business. PAC, a great area of growth and great area of profitability for BRP. We're looking at a 10%-15% growth driven by go-to-market efforts from Chris's team, and also the retail pickup that we're going to be seeing in our units sales. Overall, that results in a normalized EBITDA going up 6%-10%, with an effective tax rate of 27%-29%, which is much higher than what we experienced in fiscal year 2015 at 22%. I'll remind you that the 22% was driven also by some retroactive rate changes that were applied in Canada.
We had some double taxation that was happening on foreign income in Europe and also in Mexico, which was, I guess, retroactively adjusted by the tax authorities. Normalized net income down 9% to flat when we're adjusting for the tax rate on a year-over-year basis. We're looking at up flat to 7% up. Total CapEx, CAD 200 million-CAD 220 million for next year. There is unfavorable FX for about CAD 15 million in our CapEx versus fiscal year 2015. I will remind you that our depreciation expense is forecasted to be CAD 135 million for fiscal year 2015, up from fiscal year 2015 at CAD 113 million. We also talked when we published our results about our distribution of quarterly of H1, H2 profit, and similar to fiscal year 2015, our profit distribution will be heavily skewed towards the back end of the year.
Despite growth in revenues in the first half of the year, we are investing more in marketing in the first half of the year, you will see a marketing spend increasing, that will result in still a very heavily skewed profitability towards the back end of the year. We've talked previously about our foreign exchange and how we manage foreign exchange. The major currencies which we're exposed to is the U.S. dollar and the EUR from revenue and cost, which gives us a net profitability exposure short for both currencies. Our strategy is to do natural hedging for these currencies, we look at it on an annual basis. For currencies where we are more exporting, such as Australia, Sweden, and Norway, we do have some active hedging that's in place.
When we look at the impact of FX on our business, while it's quite significant, on the top line, it's a 5% impact for next year. On the gross margin, because of our natural hedging, we're seeing the benefit on the top line, with the costs that are coming to offset those revenue increases, we're seeing a negative impact of 100 basis points on our gross profit margin for next year. Talking about gross profit expansion, when I look at our gross profit margins, I'm not happy with the overall result. We finished the year at 24%, I think is too low. FX for sure has an impact on that. Just on fiscal year 2015 was a 1% impact and another further 1% impact on fiscal year 2016.
What drives our margin down despite the strong volume growth and pricing adjustments we're making in various countries. Foreign exchange, we also have transition and material cost increases that we've experienced over the last few years, the depreciation charge is putting a bit of pressure on the gross margin. However, there is a path to improving gross margins, the planning for fiscal year 2016 is flat gross margins despite the negative effects. It's a three-prong approach to improve the gross margin. One, lower spend in start-up and transition costs. We have Mexico, we have the PAC distribution transfer that we did in fiscal year 2015, we have a new plant that we're wrapping up in Mexico, Juárez 2. That is putting a pressure on the margin.
In the future, once we have these plants up and running, we'll have a lower spend there. Also we have hard cost savings on material costs. José will talk further in his manufacturing strategy, the teams are working hard to design products with reduced costs, that strategy will pay out in the future. Also with the volume growth, we will see a better asset utilization and therefore more operating leverage coming from that volume growth and therefore boosting margins upward. Also with new product introductions entering into new segments, favorable mix, we'll see that margin improving as well. What's the path to gross margin increases? As I mentioned, the key items in terms of the cost of sales is material, freight, and direct labor. With the transfer of PWC to Mexico, that's going to be a benefit to our overall cost of manufacturing.
I see packaging and warranty being flat. We're pretty much world-class in terms of our overall warranty cost, so no leverage there. However, with additional plans and higher depreciation charge in future years, I'm seeing that element item impacting our margins unfavorably. When we look at pricing opportunities, the U.S. market is usually a good proxy, and export countries use the U.S. market for basis of pricing. Here on this table, you see the U.S. dollar strength versus key currencies in the BRP business over one year and two years. As you've seen, the U.S. dollar has strengthened versus these currencies. What happens is that there is pricing pressure increases for these markets. We do view favorably the U.S. dollar being strong despite the negative impact on our gross margin in the short term.
In terms of financial position, working cap, we finished with 65 days of inventory at the end of the year and 32 of AR. The objective is to further reduce the number of days that we've invested in working cap. We're looking at an eight-day reduction. Eight days, about CAD 80 million cash generation coming from better management of working cap. Key levers for inventory management would be tighter control of finished goods. The fill rates that we're experiencing in certain export markets are too high, which results in improved or higher inventories. Also on the raw material with our strategic sourcing approach and our agility mandate that we have, we're seeing opportunities to see reductions in working cap. In terms of CapEx, we talked about the forecast for the year.
What I'll briefly say is that we expect to continue to invest in CapEx significantly in the next few years. We've expanded into new segments, into new product categories. We need to maintain those product categories and the categories we're in today. In order to be dominant in that market, and maintain the BRP heritage of innovation, CapEx is a key driver for maintaining that leadership. We expect strong investments in CapEx going forward. In terms of cash position, a very strong cash position at the end of the year. We had a total of CAD 232 million of cash on the balance sheet, and we have a line of credit which was unused as of January 31st for CAD 350 million. Therefore, we have ample liquidity to meet the working capital requirements that we have on an annual basis.
As you know, we have a seasonal business, so we can dip into our cash reserve or build working cap to the tune of CAD 250 million during the year. Therefore, with that cash on hand and credit facility, there's no areas of concern there. In terms of overall indebtedness, we finished the year with a leverage ratio of 1.9 total net debt to normalized EBITDA. Since the IPO, we've delevered the business. Outstanding debt is about USD 800 million. Very favorable terms on our debt. Covenant light, all-in cost of 4%. Therefore, it's not our intention in the short term to reimburse the debt. The strategy is going to be to naturally delever the company, and at an opportune moment, near maturity, we will assess whether we want to pay down some debt, and maintain a leverage ratio of about 1x going forward.
Last but not least, on March 27th, we issued an announcement an NCIB. The objective is to purchase some shares opportunistically. We can purchase up to 3.7 million of shares in the market in the next 12 months. As a conclusion to the finance section, as a private company, we've always managed this company for the long term and doing what is good for the long term. The fact that we're public does not change that perspective. We will manage this company for long-term shareholder return, and make sure we consistently deliver on that year-over-year. I will take your questions.
Thank you. Sébastien , I thought your rule of thumb in terms of profitability being 1.5 times top line was kind of helpful in the morning. Looking at 2016 guidance, seems like EBITDA is growing below that. Is it below that from 1.5 times? Is it just FX or is there something else that's impacting that?
There's FX that's impacting that EBITDA. When you look at the top line and you strip out the five points of FX, top line would be 0%-4%. If I go back to the overall guidance slide, we would be very close to that 1.5 ratio. Again, it's a long-term target, so some years we will deliver, and some years we might be short, and some years, hopefully, we will exceed that target more often than not. Cameron?
You looked at or you talked about the working capital, the inventories, and accounts receivable. Can you talk about payables? They were up quite a bit year-over-year. Has something changed in the business that's caused that to happen?
Yeah, actually, it's a very good question. The main driver of that, and as you all know, in Q4, we had an exceptional quarter in terms of top line. In order to generate that top line, you need to manufacture quite a bit, and you need to purchase a lot of goods. Therefore, that was just the outstanding AP balance that we had from all the purchases that we did in Q4 that drove that higher level.
Sébastien, you talk about on your slide seven, increasing profit margins, and I think one of the biggest driver that I see there is materials. You went a little fast there. Can you give us a little more colors about how are you going to bring your material costs down? I see two green arrows going down, so I would think that's probably the biggest driver of your margin increase. Is that going to be volume discounts with your suppliers, or is it going to be more like a reduction in material in your products?
Well, there's two things that are going to drive the material. The first one is, José will cover it in our strategy of design to quality and cost. We have, I guess, a new approach or approach of designing products focusing on cost from the start. Therefore, that will generate significant benefits in terms of reduction in bill of material. It's not just the cost, but it's also how you build a unit on the assembly line. To drive costs down, and also with the volume pickup while you have much more leverage with your suppliers to negotiate better pricing.
Sébastien, you talked about the stronger US dollar leading to higher prices over the course of time. What timeline do you expect that to take place over? What are your assumptions or what are your expectations in terms of how that would affect consumer demand at those higher price points? Potentially, does it open up an opportunity for you in terms of your product assortment to introduce lower price point products?
It's something that happens progressively. It's not overnight that you're going to be adjusting pricing. If I look at, let's say, Canada, 12 months ago, you would look at a good in Canada versus the U.S. and the pricing ratio. If you were to take that U.S. good and bring it to Canada, it would be a 1.07. Today, when you take that U.S. good and bring it to Canada, it's like a 0.90. What we like to keep is a 10% pricing gap between Canada and the U.S. When you're out of that pricing gap, that's when you need to adjust pricing. We monitor as well cross-border shopping.
At the level we are today between Canada and the U.S., you're at the fringe where the Canadian consumer or the U.S. consumer is going to start looking to maybe go up north to buy his goods, that's where we'll probably need to tweak the pricing. It happens progressively. Yes, it does create some pricing elasticity and influences consumer demand. However, when that situation happened in Canada where we needed to bring our pricing down, we did see a huge spike in demand increasing. We brought our pricing down quite considerably in Canada in 2009 and 2010 when the U.S. dollar came at par with the Canadian dollar, we didn't see an increase in demand. We follow market as well, what other competitors are doing. The pricing adjustment is important but not significant enough to deter some of the consumers from buying.
Just to come back on CapEx, the CAD 200 million to CAD 220 million for this year, CAD 50 million will come from FX. It seems that CapEx will stand at high levels for the foreseeable future. Assuming an economic downturn, how low can you reduce the CapEx in order to protect the cash flow or the cash position?
Well, the reason why we First point is we want to have that financial flexibility. We went through the recession where we had to reduce our investments considerably in CapEx. When we came out of the recession, we're a bit behind by certain competitors who were still able to invest in CapEx. The first mission that I have is that we maintain that financial flexibility and that we don't necessarily sacrifice the long term of the business to meet our financial obligations. Yes, we have some ability to reduce the overall spend. Could we bring it down to CAD 150 million to CAD 125 million if need be? Yes, we could go to these levels, the objective is let's have a good balance sheet and make sure that we don't sacrifice on the long term if a downturn happens.
Maybe from a high level, can you talk about a change in promotional and inventory management strategy at the channel level to avoid, say, like we had in the second quarter, a very low sub 20% gross margin, and what we're doing differently now compared to years past?
Well, we've always managed inventory tightly. As José mentioned in his opening remarks, we were a bit surprised last year from the competitive dynamics in the side-by-side market, therefore we had a bit too much of Maverick units in the field and therefore needed to announce promotions and discount to liquidate that inventory. We continue to manage that inventory tightly. When you look at our overall inventory position as of January 31st, we were up 15%. 12% of that was seasonal products. When you look at that 12%, half was snowmobile, and in snowmobile, we're at levels that are considered normal, the other half was SPARK. SPARK, the retail season is just happening. Our growth business, which is the year-round products business, accounted for only 3% of the increase in overall inventory. When we're expanding dealer networks, we're introducing new products.
The average number of days of inventory is actually going down. I'm comfortable with the overall inventory position, but it doesn't say that, again, given a bad season, bad snowfall, horrible summer, we might end up with a bit more inventory than we like, and we need to push programs into the network in order to liquidate that inventory. With the year-round products business, we have what we call the OMS system, the order management system, where it's dealer replenishment based on what they retail, and therefore, we work closely with our dealers to make sure that they don't overextend their orders and have too much inventory. When they retail, we replenish.
Thank you. All right. Sébastien. Now we've really fallen behind, but that's all good stuff. Thank you. I introduced José earlier, and I could go on forever in talking about José, but I think the best way to introduce him is to loosely quote Richard Branson, who once said that, "Do not think about the cheapest way to do it, or do not think about the fastest way to do it, but think about the most amazing way to do it." I think this is spot on in terms of describing the innovative mindset that there is behind José's leadership. To introduce the Plan 2020, José, I invite you to step up to the podium. Thank you.
Pascal Bassim, we'll need to rehearsal your introduction, I think. Okay, here. For the first time today, we'll tell you a lot more about our manufacturing strategy. This is a beautiful picture that have been taken here in the factory. Here's somewhat the situation that we're facing when we became a standalone company. You have Valcourt, where all started with Joseph-Armand Bombardier. He started his design and manufacturing of snowmobile, but Valcourt is not the best location to supply North America. It's in the east, when most of our competitor are more central. We had the disadvantage in term of close to market for product like off-road, for product like watercraft. When we acquired Austria here in 1970, we acquired the know-how, and it's not the best place in the world to supply the world because it's here in Europe when your market is mainly North America.
When you're planning to go from CAD 2 billion to CAD 6 billion, maybe in time, more, how do you revamp your manufacturing strategy to have better cost worldwide, but at the same time protecting where the know-how is in Valcourt, where the know-how is about the product, We have a lot of good people there, and the know-how here in Gunskirchen. That was a very complex situation, It takes a few years to put our plan together, We have a very strong plan. My goal this morning is to give you an idea where we're going with the manufacturing strategy and how we are comfortable to have EPS growing at 1.5 times sales because we'll leverage the investment that we have done in the last few years. The next part. Here, a bit the story.
Here the story that we've done. In 2005, we have announced that ATV would be moving to Juárez. In 2006, we started the assembly of engine in Juárez also. In 2007, we announced the Spyder that would be produced in Valcourt. In 2011, we announced the entry in the side-by-side business to be produced in Juárez 1. I will come back on this. In 2012, we announced the opening of Querétaro and to make room for side-by-side in Juárez 1, we had to move out the engine in Juárez 1 and move it to Querétaro. Mid-2013, we started the production of hull in Querétaro. The production of the Spark in the summer of 2013, introduced the product in September 2013. After that, in 2014, we announced the F3, which will bring volume to Valcourt.
The transfer of the traditional watercraft to Valcourt to Querétaro. Juárez 2 was there for the new off-road entry. When you look at this, you're saying they have no strategy. We have a strategy. Here what happened. Doing all of this, basically, we took product from Gunskirchen and moved them to Juárez 1. We're missing space in Juárez 1, moved them to Querétaro. At the same time, in parallel, we're moving product from Valcourt, the ATV in 2006 to Juárez 1, and the watercraft over two years in Querétaro. That's basically what happened. Today, here our footprint in Mexico. First, Juárez 1 was done in 2006. To be honest, at the time, it was our first factory in Juárez in Mexico, and we were quite opportunistic.
We started from a factory that was building. The factory that we purchased was owned by RCA, you know, the TV set. It was perfect for us, but the location was in the middle of the city. It's surrounded by neighborhood, by other industrial park, no place for expansion. For us, we acquired the building at a very cheap price, and we move ATV from Valcourt to Juarez 1 in 14 months. Very quickly. For us, it was very convenient. At the time, with the engine there and the ATV there, we were occupying about 70% of the space. The move was done, and if we had to redo it again, I would do it the same way.
When we move in side-by-side, we had to farm out some manufacturing component outside, and we never paint our chassis in Juarez 1, which is not the most effective thing. Again, we're running against the clock to make our entry in the off-road business. Basically, Juarez 1 today is the house of ATV, and also the Can-Am Commander and the Can-Am Maverick. Querétaro is a different story. We started from the greenfield, we have plenty of space there. Querétaro, very complicated program. 4 phase. The first one was the assembly of ORV engine. To make space in Juarez 1 we had to move the engine that was done in Juarez 1 to Querétaro. After that, we started the production of our hull ourself and sourcing of the technology. Camoplast was not ready to follow us in Mexico.
It was the best place to manufacture hull and deck in a lower cost country. The third element was the start of production of SPARK. To be able to achieve the MSRP on SPARK, we needed to be in low-cost country. The fourth element was the movement of traditional watercraft from Canada to Querétaro. It's a 2-year program, and we're constantly investing in that transition cost. Last but not least is Juarez 2. Juárez 2, it's a greenfield. It's 16 minutes from Juarez 1. There will be a lot of synergies between the two, and we'll be able to in-source things that we farm out when we started side by side in Juarez 1, and we'll do our painting ourself. We'll do more stuff ourself, which will improve our margin. The footprint that we have today is 3 factory in Mexico, Juárez 1 and Juárez 2 for off-road vehicle.
Querétaro will build all the engine for vehicle made in Mexico, watercraft and off-road vehicle. Also in Querétaro, we're producing the watercraft. For off-road vehicle and Querétaro, the location is significantly better than manufacturing the engine here in Gunskirchen and/or the vehicle in Valcourt. It's more closer to our market, which is a lot in the South and Southwest. This is our footprint in Mexico. We started 2 years ago what we call internally the 2020 Plan, which is agility and lean principle to support growth. The idea here is with those 2 factory in Mexico, how do we realign the other site? Basically, the strategy is about agility. The goal is to design more and more engine for multiple product line. Example, the 900 ACE today is going watercraft, is used on snowmobile, and it will go on other product line soon.
Standardize and simplify our product lines. Harmonization of assembly technique. What you will see today in the factory will be installed everywhere, capacity to assemble all product at all site. When the footprint will be done at the end of this year with Juárez 2, we have the capacity to move product between sites. Lean. More and more, we're doing design to quality and cost. Every time we launch a new platform, we want to improve margin. Product design for assembly, implement the best-in-class lean manufacturing principle. You will see Thomas presentation in a few minutes. Because of the long heritage here, the layout is inefficient, now we are in the middle of the transformation to make the factory here very efficient, we'll do the same thing in Valcourt in time. Growth.
The fact that we move production out of Gunskirchen, we're making room for new technology. Right now we are in the process of farming out old technology coming in new technology that either has a good ROI or bring customer benefit, Thomas will talk about it. Everywhere we're trying to implement one-piece flow to support a more flexible ordering system with our dealer and our consumers. In a nutshell, this is the 2020 plan for the manufacturing strategy, agility and lead to support growth. All the benefit of this is included in our target revenue and our target margin, that's why we are comfortable with the 1.5 time EPS growth versus the revenue growth. Here, the Gunskirchen situation. In the left side, you have Gunskirchen before. Before here, again, the number is about 30% was manufacturing of component, 70% assembly.
We're going more the other way around. Manufacturing will take more space than assembly because we move assembly to Mexico. Here, Thomas will talk about it, we farm out or outsource low value added technology, we are in the process right now of bringing in high value technology that either have a good ROI or either have customer benefit. This will give us a chance to reduce our cost here in Gunskirchen. Right now, Gunskirchen is in the middle of the plan. What you will see today is we are about halfway into the program. Valcourt, the plan will start this fall when watercraft will be totally transitioned out of Valcourt. I have a question for you. Any one of you have done remodeling in their house? You've done? Have you ever organized a big party in the middle of remodeling? Probably not.
That's the chance we took with you today. Here in the factory, we are in the middle of remodeling. Thomas will explain. We decided to invite you here because we believe you will see a lot about the product and R&D. Don't be surprised when you go in the factory. It's a challenge to do a big party when you are remodeling your house. Imagine to do a presentation like here or a visit like here today and continuing production in the middle of a remodeling. The factory is in the middle of transformation. The team is doing a great job to handle everything at the same time. It's quite a risk or a chance that we've took inviting you in the middle of this remodeling. We want you to be witness of what we're doing here. Next slide is very important.
That's the capacity. We had to realign our site in Valcourt and in Gunskirchen. We somewhat over-invested in Mexico to give us the base for footprint. Here our capacity usage versus our effective seasonal capacity. In 2015, you see where we are with the yellow bar, the capacity that we're using versus the full capacity. In 2016, you see a growth and the range, the light yellow is the guidance, basically. You see in Juárez 2, we're adding some effective capacity, but you would be saying it looks small for a factory of 400,000 sq ft. Don't forget that in Juárez 2, we'll in-source some component that we're farming out.
On top of it, we are doing our paint system ourself, which, to be honest, make no sense at this point with the volume we have with ATV and side-by-side, to have someone doing our paint or frame outside the factory. That's why you have this small increase in Juárez 2. You see that the black line is stable over the years. You see our capacity usage will go up in time. The message I want you to stay with is we have right now the capacity with the factory that we have to do the CAD 6 billion sales that we've been talking about. At the end of all this is our manufacturing footprint, leveraging Mexico, but at the same time, realigning our mature product.
Here, the way you should look at it, we have in the world, we'll end up with four center of excellence. What we call a center of excellence is a site where you do R&D, industrialization, and manufacturing. The fourth center of excellence is Sturtevant. Alain is where it's dedicated to outboard engine and jet propulsion system. We're doing their design, R&D, industrialization, and production. The second one is Valcourt. For the design for all the product line, the industrialization is done there, but we're doing the assembly of snowmobile and Spyder. The third one is Gunskirchen here, and Thomas will talk about the design for engine, but the design for gear box, industrialization, and production. The fourth one is Rovaniemi. Some of you could say, "Why Rovaniemi?" Rovaniemi is 100 km from the Russia border.
In Rovaniemi, they are specialists to design snowmobile specific for the Russian market and the Scandinavia market. 75% of the component they use are the same than Ski-Doo in North America, but they adapt it for the Scandinavia and the Russia market, very close to the market to deliver. Also there, we sub-assemble the 6x6 ATV for the European market. That's our four center of excellence. After that, you have three center of expertise. You have what we call in our wording, three center of excellence based in Mexico. Juárez 1 and Juárez 2 for off-road vehicle, Querétaro for watercraft and all the engine that will be for vehicle that will be assembled in Mexico. Basically, this is the 2020 manufacturing plan.
At the end, what I want you to retain from that presentation, some of our competitors are adding factories because they are chasing capacity. Our situation was different. We decided to move in Mexico to benefit of the lower cost country and to be closer to market for watercraft and off-road vehicle. By the way, Mexico is a very good location when you ship international. Very easy to ship from Mexico to international market. We believe it is a good location for off-road vehicle and watercraft. The other one is we are doing with the two mature sites where we have know-how, realignment, and that is what you will see here in Gunskirchen today. What we are defining for Valcourt and the program will start on the back end of 2015. My other message is we have enough square feet to do the CAD 6 billion plan.
We might continue to invest into tooling for the factory, but we have enough square footage to build a CAD 6 billion plan. We believe that, in time, all of this, we somewhat over-invested to realign our worldwide manufacturing footprint. Now it is time to leverage the investment, and that is why we believe we can grow the margin. That, in a nutshell, the 2020 manufacturing plan.
No sizable investment to add some square footage. I would assume that Spyder, you can double the number of Spyder in Valcourt over the next five years.
We will. When we will double, I should not say if. When we will double the volume of Spyder, we might need some investment again for the factory inside, but no more wall, no more building. That is the point.
Perfect. Would it make sense as volume grows up for the Spyder to go in low-cost country, or it's very strategic to keep it in Valcourt?
That's the flexibility that we have, Benoît.
Okay.
The way now we're designing our factory. With minimum investment, we could do ATV in Valcourt if we want. It's not the idea, but we could do that. I think we were stuck with the footprint, with the heritage here in Gunskirchen and in Valcourt. In the last 10 years, we had that vision to have a worldwide manufacturing footprint, which I believe will be, you always live with the heritage, but we'll have very efficient overall. That was the focus. That being said, in time, if you say five years on the road because of tariff, maybe we'll end up with a small assembly in Brazil to avoid the tariff, but you need the critical mass, and we're not there yet.
Okay. Maybe last question. Once Juárez 2 is finished, should we expect the ORV engines to flow back in Juárez?
No.
No?
Between Juárez 1 and Juárez 2 , the distance-- Sorry, you said Querétaro?
Querétaro, sorry.
Querétaro. Okay.
Yeah.
No, the engine will remain in Querétaro. This is a specialty.
Okay.
We decided to assemble in Querétaro all the engine for off-road and watercraft. We're shipping the engine to train transportation to Juarez. Lead time is about a week, it's very convenient.
Okay. Juarez 1, will it focus on the ATV one, the other will be focusing on the side-by-side or?
We have the flexibility-
Okay
to do. Right now, Maverick and Commander are in Juárez 1 . In time, they could go to Juárez 2 , it need to be justified. We could keep them there.
Okay.
We have the flexibility at the end.
This will be quick. Just the mix of costs in Mexico, what ratio is peso and what ratio is US dollars?
Very small. The only peso cost we have is the labor. The labor cost in Mexico, as you can appreciate, is a fraction of what it is in other regions of North America. A very small cost base in peso.
Thank you very much.
José. We're closing out on the presentations for today. As most of you know, Rotax has been at the heart of all BRP products for years, and rarely have we opened doors to the facility here. This is, I guess, in a way, a once in a lifetime opportunity for you all. Our last speaker is the General Manager for BRP-Rotax, Thomas Uhr. If you recall, if you were paying attention, I guess, we had speakers before came from both Ford Motor Company and General Motors, while we're in a different part of the world where the German brands are dominating the automotive landscape. Thomas Uhr joined BRP from Mercedes, where he held various leadership roles in manufacturing that took him all over the world. I guess with that, we have Thomas Uhr to present Gunskirchen 2020.
Thank you, Pascal. Yeah, regarding the brands people are coming from, there is an upwards trend I see. There is definitely. Sorry. Pascal introduced me, so I will jump directly into the presentation. I think I do have today the most difficult presentation, not only that someone has eaten up my time, it's also you will have in a few minutes, you will have the chance to prove the story that I'm telling here, if it is real when you go out in the facility and you see it. I would like to look. Okay, we should have done that. What I wanted to do today, as José already announced, I would like to show you some key elements within our 2020 plan, which we call here in Gunskirchen 2020 plan, so that it is clear what we're talking about.
Also, I would like to show where we are, what are we doing to access the NAFTA market, and you already heard some of it, regarding that, and what we do besides providing the powertrains for our BRP vehicles. First of all, I would like to welcome you to the world of Rotax. As you know, for highways, for in the wilderness, on water, on snow, and in the skies, we have Rotax powertrains that normally bring you through whatever your adventure you have in front of you. This slide you also already saw, Alain showed it.
Besides the support of the propulsion systems, besides the support of the powertrains for all the BRP vehicles, we have a separate segment we call propulsion systems within BRP, and part of it is the marine propulsion system, and the other part is the Rotax propulsion system, so that you just can put it in perspective. I will touch on this one as well. Just getting to the point where we are from a far distance, as a lot of you traveled, this place in Austria might look like a small village in the Alps. Indeed, it is a small village, and it is close to the Alps, but we like to view ourselves like in the heart of the automotive and technology region here in Central Europe.
What you see here, these are the main and leading universities and research institutes that we have in 300 and 600 km distance from us. On the next one, we added the brands, and most of them you might recognize, that are around us within a 300 and a 600 km distance. We have here an area with 170 million people and, as you can see, a lot of very famous brands and not just manufacturing facilities. Most of the core R&D facilities of these brands are in this region. This is where we are, and this is maybe something that you also should have in mind where we're coming from. I always like to look into the future with at least half an eye in my rearview mirror. It not only helps in traffic, it also helps when you look into the future of a company.
We were founded 1920 as Rotax-Werk AG. The, for us, most significant topic for sure is 1962, when we started the supply of Rotax engines for the Ski-Doo, and 1970, when we were acquired by Bombardier Rotax, or we acquired and founded the Bombardier Rotax GmbH at that point in time. Of course, today we are a proud member of the BRP family since BRP was established in 2003. In between, I don't want to touch on all these innovations and all these also championships that we won and a lot of firsts that we introduced to the market so far. I would just touch on the last one, the smallest one, that we introduced end of last year, which was our 125 MAX Evo kart engine that we introduced.
This is a long row of innovation, of product innovation, that we have been able to introduce to the market within the last, nearly now 95 years. What is one reason for the relatively impressive track record that we have in history? We think that one reason is definitely this site. The advantage of this site with roughly 46,000 sq m area and above 1,000 employees that we have here on site. The beauty of this site is that we have everything very close together. We have an extremely well-integrated system between R&D, between technology development, and production. Which brings us to a point that we have a very fast innovation cycle. To get from a new technology into a product, into a production, this is something that we can turn around here on this site very fast.
Also to have these things like today, you call it very modern design to production or design to manufacturability. These are things that are basically within this site since years automatically because all the people, at least they meet at lunch or they see each other once a day. It's very difficult here to design a product without being in touch with the guy who has to manufacture it afterwards, which is a big advantage on that side. At the same time, it's helping to bring product to turn it into a serial product, so the debugging process is very fast and the quality standards are very high. I'll get to that later on. This is about the site and about the history. We already talked about the BRP vehicles that we are proud to power with the Rotax powertrains.
What I would like to draw your attention on for the next three slides is what we do other than just powering the BRP vehicles, because this might not as well known to you as the other things. The one thing is our activity with aircraft engines. The other one is our activity in the kart racing, for kart racing engines. We have some interesting things ongoing for OEMs where we supply powertrains or we have joint developments ongoing. Let's first turn into the aircraft engines with over 175,000 aircraft engines sold. We are serving them with an international network, serving and distributing, of course. Meanwhile, we are the biggest piston aircraft engine producer worldwide, which is not widely known. It's a very interesting market. We have a very good reputation within the market.
The engine that you see on the right corner, it's the newest one, the 912 iS Sport that we introduced. It won last year the award for the most innovative aircraft engine in the world. We are very proud on this small activity that we have here. Of course, you can't compare this with the production numbers that we have on ATVs or whatsoever, but it's a very interesting business and our DNA here for the aircraft engines is that we offer the best power to weight that you can get in the market. We have a fully redundant design. We are designing and producing according the POA and the DOA standards of EASA. This means these are the, as far as I know, the highest quality standards that you have in the world.
It's basically the same with the American organization, it's just a parallel organization in Europe. This is the toughest standards for quality in design and production that you can find. The benefit for us here, is that since more than 25 years, we are confronted with this very high expectation regarding durability, regarding quality and design quality and production quality from the aircraft side. This is influencing our understanding of quality and the way how we deal with quality, so all of our Rotax engines have a benefit from our aircraft activities. The other interesting business that maybe only a few of you know, is that we are the biggest supplier of kart engines for serious racing karts, and we sold so far more than 80,000 of these Rotax MAX engines in the world, starting in 1997.
Also here, we do have an international proven and stable network for servicing and distribution. We have a family of engines that we offer based in what basically is a differentiation of one design, and we have five engine executions that we offer to the market, and our idea is to provide these race engines for racers from eight to 88. Actually, this is not 100% true. I was with the last MAX Challenge in Spain, and the youngest racers I saw with our race class, they were about five years old. It's a very interesting thing to see these young people evolving into racing. More interesting than the engine itself, is the race series, because in 2000, we introduced, this comment is not from us, this is a comment we got from journalists, the biggest and fairest international racing series you can have in kart.
They're very standardized, similar karts, they're racing against each other. Every year around November timeframe, there is the big grand final, where we do have the Rotax MAX Challenge for worldwide competition. We have the world champions in each class that we have for the Rotax MAX Challenge. The interesting thing here is, for most of the young drivers, it's the first step into motor racing, into their motorsport career. I just picked out three of the perhaps well-known names like Esteban Gutiérrez, Jenson Button, and Kimi Räikkönen, the last two in Formula One, popular drivers. We had roughly one third of the Formula One drivers have been in touch with our Rotax MAX Challenge, in their career. The other area is the OEM-specific engines.
The idea here is that we use this, most likely, we try to reach working arrangements with our partners so that we do have a joint research, a joint R&D phase, then we take over production for their requirement. The benefit is that we get access to new technologies for BRP products. On the other hand, we can offer our know-how in industrialization and production know-how, which helps our customer then to get a high quality, low cost engine available. We have some premium references through our activities in the OEM sector. You see the motorcycle down there, which is a BMW, all BMW 800 worldwide, the engine is coming from Rotax. You see the jet propulsion that Alain already talked about. Of course, it's a Rotax.
You see a very new one, on the right side, which is the Rotax 600 fire pump engine, which we do together with an Austrian company, Rosenbauer, and they announced this just a couple of weeks ago, which is also a very interesting market for fire pumps. They're operating worldwide, and from now on with our engine. Coming to the Gunskirchen 2020 technology aspect. One important aspect for us, and José mentioned that already, one important aspect for us is to get new technology into our company. What is the goal? What is the direction that we are moving here? These new technologies always have to enhance our ultimate ride. At the same time, we have to have an eye on our social acceptability.
The main drivers, they are not all, but the main drivers I took out of our evaluation chart here, which is power to weight ratio, dynamic behavior, drivability. It's the fuel and oil consumption that we provide, the emissions that our engines does have, the environmental product footprint, so to produce such a product, and of course, the cost issue that we have with our powertrains. If you just take the ultimate ride and the social acceptance in the graph, this is where we think that our competition is right now. We took the better competition for that. This is where we are today with most of our engines. We didn't take all of them, but the most important ones. This is where we are today.
We are ahead of competition, of the best ones of the competition, but there are also some areas where we are very close. This means we can't just take a nap and wait. We have to do something. This is what we have in mind. With these two dimensions, ultimate ride, at the same time, having an eye on the social acceptability, this is the way how we want to improve our powertrains that we have for the future. This is the technology side of that. The other interesting thing, and José already touched on that, is how do we do that? Because our plant was very heavily utilized, and what we did, what we started in the last years, and we are still in the process of doing that, we moved a considerable portion of assembly operations from Gunskirchen to Querétaro.
First to Juárez, I spared out this step. Finally now in Querétaro, there it will stay. This brings us closer to the NAFTA market and to the NAFTA regulations, of course. We have the chance to utilize low-cost assembly operations, which is especially important for a lot of labor-intensive activities. At the same time, it gives us here in Gunskirchen, and you will see part of that later on, the opportunity to introduce new technology for our operation here. We increase the machining space significantly, and we reduce the space for the assembly. It's not just the same assembly that what we did the last 20 or 25 years. What we do here also, we at the same time, when looking at the new opportunity, we want to leapfrog here to a new dimension for assembly technology as well.
One important thing for us is to have flexible assembly lines in the future. Today, it's still a lot of work and we're losing a lot of time from changing from one product to the other one. This should be something very easy in the future. Our goal is that we have the capability of have a one-piece flow introduced for assembly. At the same time, we are investing into track and trace technology. This in Europe, we are talking about Industry 4.0. I think in North America, it's more under the heading, the big data. We believe, we truly believe that with a better data management in our plant on the whole process from ordering to manufacturing to delivery and for quality issues afterwards, it's very beneficial if we do have a state-of-the-art data management here.
Build to order, it opens a new opportunity what we can provide to the market. Today, we don't do that, this is an opportunity that we can offer extensively in the future. We are introducing new technologies that will have, or that gives us the opportunity to increase our efficiency like collaborative robots. If we are lucky, we see an example when we walk down on the shop floor. This is the technology change on the assembly side. This is the ugly picture, José mentioned this was our material flow in 2012, it was not so efficient. I do have to correct my CEO here. It is still a benchmark facility, but it is not as efficient as it could be. Therefore, we looked at the material flow in our facility. We looked at the organization that we have.
We have a typical organization that you normally have in these manufacturing plants where you have certain functions organized. We did a very tough lean analysis, and of course, this is just an excerpt of that. This facility is organized according to the Toyota lean principle with the BRP MS manufacturing system. You will see it later on since more than 15 years. With this process, we analyzed our own situation, and you can see there are some green ones and some yellow ones that might be acceptable, but we also have some red ones in there. Just looking at the waste that we create in our facility. Where we on the way to get to is, first of all, we straightened out significantly our material flow.
In some areas, you will be already able to see that. At the same time, we will have the one-piece flow capability. We will have significantly reduced material in process and the sustainability increased due to traceability and quality measurements. We think it's not just a process issue. You also have to look at the organization. We are also in a period this year where we're changing to a more process-oriented, flat, and lean organization that we are introducing and developing right now. As soon as we will have this realized, and latest in 2020, we will have that, to our standards of lean manufacturing, we have most of the issues perfectly addressed. You always can get better, but if we get to that point, this is our goal we want to achieve with the Gunskirchen 2020 program.
When you look to that, what I would like you to remind is that Rotax is not just powering all BRP vehicles with cutting-edge technologies. We offer, with aircraft and kart, two very interesting businesses with more to come. As you will hopefully agree after the tour, we have a world-class benchmark facility, and it's on its way to become even better. For the rest of the day, I hope you enjoy the world of Rotax, and we are very proud to have you here. Of course, I'm willing to answer your questions.
Who are your biggest competitors in aircraft engines on the karts?
On the North American market, we have a market share, the latest data I saw was 73%. This sounds maybe arrogant, but there is not really a big competitor there. If you compare who is on the market as big aircraft manufacturers, you have the big ones, the old ones like Continental Motors, for example, but they are not really in our segment at the moment. In our segment, the competition there are a couple of smaller aircraft manufacturers. Most of them are not providing certified engines, so most of them providing uncertified engines in this area.
Where does Lycoming fit in?
Lycoming is like Continental, you know, with very heavy engines, they're coming from the top end. Both of them do have some smaller ones in their lineup. They are significantly heavier than ours, it's not really a competition right now. We are not playing in their playground right now, they are not touching us.
It seems that you're becoming better in terms of leveraging the existing engine. At the peak, how many engines did you produce for BRP, and what is the kind of goal you can achieve going forward? The 900 ACE seems to be a good example for this part.
I think the question here is not the amount of engines in total, so the capacity. We always have to look on our Mexican facility and Gunskirchen together, because a lot of manufacturing will be done here. Last year, the assembly in Gunskirchen, we had, I think, 15,000 units more in Gunskirchen than we assembled in Querétaro. This year or latest next year, we will have more engines assembled in Mexico than we assemble in Gunskirchen.
I'm more talking about the type of engines that you produce at the peak.
Okay. The variety.
Yeah.
The variety of engines. Yeah. I'm an engineer, and if there is a task to come up with a great technology, I tend to go there. Fortunately enough, we are always looking at it also from a portfolio point of view. What we have at the moment, I would call it our workhorse. It's our 900 three-cylinder engine that we produce here in Gunskirchen, that we produce in Mexico. We have our bigger three-cylinder variants there, but they are relatively old developments. This is the newest. The new ACE technology is for sure the technology for the future. If possible, we would like to have only a few engine lineups, basic engines, and to have more engine executions.
With the one-piece flow capability, we would be able, if we have the same crankshaft, the same crankcase, and so on, with some changes, we could be able to tweak and twist this engine to a certain direction, what we are already doing, but there is more that would be possible in the future. You don't get a number out of me, because this depends very much on aircraft engine, for example. It's so different. You won't see the same basis for an aircraft engine as we have it for, let's say, for a PWC engine.
When you develop the 1,330 cc for the Can-Am Spyder, did you build a case with leveraging the engine into or can you put that engine into Sea-Doos or other types of products?
In principle, yes, you can do that. If you have one engine, one size fits it all, you have to make compromises. You always have to ask yourself, "Is the compromise too big, or is it acceptable?" From a manufacturing point of view, you would like to have one engine, and you'd put it everywhere. Because we are a high-performance company, it's very difficult to sell a customer something, and you tell him, "Well, it's cheap, but it's a good compromise. It should work for you." This is not the DNA of our customers. Coming back to the engine that you asked for, the 1330 engine is, I think, a very good solution for our Can-Am Spyder, and you will try it out this afternoon. The engine itself, we never design an engine without potential, has potential.
If to transfer this engine into a watercraft, I personally wouldn't go there because we would need to change oil circuits and things like that, it's more complicated than you would like to have it. I wouldn't go there.
Okay.
Thomas was not there. One of the characteristics of the Spyder rider, they wanted to have very high torque.
Yeah.
Those guys, they want to cross a village at 70 km/h and don't shift only one gear. From six to five, cross the village and go up on the other side then. Spyder is so important, we decided to design the engine around what the customer was asking for the Spyder engine.
Okay.
We didn't do trade-off there.
Okay. Last question, just for the electric vehicles or hybrid, is it something that is developed here? Assuming we are still early days, assuming there's a pickup for hybrid or electric vehicles, it's something that you could address internally?
When we go to our tour, just downstairs here, you will just pass by a hybrid Spyder. It's working. We can ride it. We have the technology. This is again, a question of market demand. If it makes sense for the market, we would be able to provide something like that. At the moment, if you look to the automotive industry on hybrid, it's a wise idea to look very closely on it, because it's not that easy, that it is an overall benefit for the customer. The technology is available, we could react if there is a market demand on that. Okay. Sébastien, you okay? Otherwise, we have the chance on the tour to do that. Thank you very much.
Thank you, Thomas. Thank you. [Patience please]. I want to take the opportunity to thank our speakers. Also want to thank the team who supported us there, Andrea, that's sitting over there, as well as Melanie and Andreas. Also want to thank our colleagues in Valcourt who made this day, this event possible. Thank you very much, and you all have a very good day.